Saturday, July 2, 2016

week ending Jul 2

Fed Should Ease After U.K.'s Vote - Narayana Kocherlakota - Britain’s vote to exit the European Union and the reaction in global markets offer important lessons for the Federal Reserve. It should be easing policy in the near term. The outcome of the Brexit vote came as a big surprise to global markets. Over the past two trading days, we have seen large increases in sovereign debt prices and large declines in the value of the British pound. The vote also opens up the possibility of many more surprises. Over the next few months and years, we will learn a lot more about how Brexit will be negotiated and how those negotiations will affect the U.K. and European economies. We will also find out how Britain’s departure will affect the financial and economic stability of the countries remaining in the European Union. There is a significant downside risk to global demand for goods and services -- and to U.S. prices and employment -- associated with the answers to all of these questions.But these matters are hardly the only significant ones facing the global economy. We all know that China can’t keep growing at 7 percent a year forever. But how quickly, and to what level, will its growth rate fall? Businesses in emerging markets have large amounts of debt. How will that debt affect those countries’ growth prospects? As with Brexit, the possible answers to these questions represent significant downside risks to global economies and the U.S. There are, of course, upside risks that could lead to unduly high U.S. inflation. But the Fed can always deal with those outcomes by setting interest rates high enough to choke off inflationary pressures. The problem is that, even with the federal funds rate below one half of one percent, inflation and employment are already quite low. How will the Fed succeed in keeping inflation and employment close to its mandated objectives if any of these adverse shocks occur?

Goldman Sees A UK Recession, Shocked By A Fed "Tightening Cycle Unlike Any In Modern History" -- Starting off the year, Goldman was prodigiously optimistic, bullish... and dead wrong. Since then the bank has cut its rate hike forecast from 4 to 3 to 2 and, now in the aftermath of Brexit, it has just the excuse to say that "our forecasted path for the funds rate now looks quite unlike any tightening cycle in modern Fed history—one increase, followed by an extended pause, followed by gradual but steady increases over the subsequent three years." Which, quite simply, is another way for Goldman to say it was dead wrong. Again. Here is how Goldman throws in the towel on the whole rate hike thing. The decision of voters in the United Kingdom to exit the European Union will begin a lengthy process of negotiations with uncertain effects for both the UK and the rest of Western Europe. The trade linkages between Britain and the US are relatively modest (exports to the UK amount to about 0.7% of US GDP), so even in the event of a meaningful downturn, these spillovers are unlikely to derail US growth. Financial linkages are much tighter, however, and here we have already witnessed meaningful effects: our Financial Conditions Index (FCI) tightened by about 30 basis points (bp) today—enough to subtract around 0.2pp from GDP growth over the next year, if the FCI changes prove persistent. As a result of the aftershocks of the “leave” vote on US financial conditions, we are downgrading our US growth forecasts for the second half of this year. We now expect GDP growth to average 2.0% in 2H 2016, down from 2.25% previously (see table below). A lower baseline outline for the economy as well as risk management considerations are likely to keep the Federal Reserve on hold for longer than we previously expected. Before the British referendum, we saw a 25% chance that the FOMC would raise rates at its July meeting, and a 40% chance that it would hike in September. We now see the odds of a hike next month as less than 5%—it would take a sea change in financial conditions and exceptionally strong economic data for the Fed to act so soon—and the probability of a hike in September of just 25%.

Fed Watch: Powell First Out Of The Gate -- The first Fed speaker of the post-Brexit era delivered a decidedly dovish message. Confirming the expectations of market participants, Federal Reserve Governor Jerome Powell made clear that the Fed was in a holding pattern until the dust settles. Much of the material is similar in content to his May speech, but the shift in emphasis and nuance indicate a substantially policy path.Powell summarizes the economic situation as:How should we evaluate our current performance against the dual mandate? I would say that we have made substantial progress toward maximum employment, although there is still some room for improvement. We have more work to do to assure that inflation moves back up to our 2 percent goal. Both points are important. On the first point, Powell sees evidence of labor market slack in low participation rates, high numbers of part-time workers, and low wage growth. Recent labor reports concern him: While I would not want to make too much of two monthly observations, the strength of the labor market has been a key feature of the recovery, allowing us to look through quarterly fluctuations in GDP growth. So the possible loss of momentum in job growth is worrisome. My guess is that they will want to see a string of 2 or 3 solid labor reports before they breathe easier. Still, by acknowledging that the economy is operating near full employment, does he open the door to concerns about inflation? No: More important: In addition, inflation depends importantly on the inflation expectations of workers and firms. A widely shared view among economists today is that, unlike during the 1970s, expectations are no longer heavily influenced by fluctuations in inflation, but are fairly constant, or anchored. For both these reasons, inflation has become less responsive to cyclical changes in the economy. The signs are worrisome: Given the importance of expectations for determining inflation, these developments deserve, and receive, careful attention. While inflation expectations seem to me to remain reasonably well anchored, it is essential that they remain so. The only way to assure that anchoring is to achieve actual inflation of 2 percent, and I am strongly committed to that objective.

U.S. Treasury Yields Plunge as Investors Expect Central Banks to Support Growth -- Yields on U.S. government bonds touched new lows Friday, the latest records set during this year’s rally in sovereign debt, as investors continue to grapple with slow global growth, ultraloose central bank policies and the aftershocks of the U.K.’s vote to leave the European Union. The bid yield on the benchmark 10-year Treasury note fell to 1.385% during European morning trading, according to Tradeweb, breaking its previous intraday low of 1.389% set on July 24, 2012, when it also set a record closing low of 1.404%. Bond yields didn’t last long at those levels, rising later in the morning as investors favored riskier assets, such as stocks, as a new report on U.S. manufacturing activity showed signs of strength in the U.S. economy. The yield on the 10-year note closed at 1.446% in a shortened session ahead of Monday’s Independence Day holiday, compared with 1.492% Thursday. However, the yield on the 30-year bond still closed at record low of 2.226%, beating out the previous record of 2.25%. Yields on U.K. government bonds also fell to fresh lows on Friday, with the yield on the 10-year gilt settling at 0.860%, according to Tradeweb. The sharp overnight drop in U.S. bond yields roughly coincided with a news report that suggested the European Central Bank would be cautious in loosening certain rules governing its quantitative-easing bond-buying program. A loosening would make it easier for it to buy the debt of peripheral European countries. The report appeared to lead some investors back into German and U.S. bonds after an earlier report that the ECB was considering such changes had led to a rally in Italian and Spanish government bonds, analysts said.

Q1 GDP Revised Up to 1.1% Annual Rate -- From the BEA: Gross Domestic Product: First Quarter 2015 (Third Estimate) Real gross domestic product -- the value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production, adjusted for price changes -- increased at an annual rate of 1.1 percent in the first quarter of 2016, according to the "third" estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2015, real GDP increased 1.4 percent. The GDP estimate released today is based on more complete source data than were available for the "second" estimate issued last month. In the second estimate, the increase in real GDP was 0.8 percent. With the third estimate for the first quarter, the general picture of economic growth remains the same; exports increased more than previously estimated ... Here is a Comparison of Third and Second Estimates. PCE growth was revised down from 1.9% to 1.5%. Residential investment was revised down from 17.1% to 15.6%. This was close to the consensus forecast.

1Q16 GDP Revised Upward To 1.1% Vs Early 0.8% -- June 28, 2016; 2Q16 Estimate/Forecast Dips Slightly -- I guess if you give them long enough to "run the numbers," you can get any number you want. Bloomberg reports: The world’s largest economy expanded more than previously projected in the first quarter as improved performance in trade and business investment more than made up for weaker consumer spending. Gross domestic product, the value of all goods and services produced, rose at a 1.1 percent annualized rate, compared with a previously estimated gain of 0.8 percent, a Commerce Department report showed Tuesday in Washington. Corporate profits at the start of the year were also revised up, giving a brighter picture to gross domestic income. Meanwhile, for 2Q16, GDP Now forecasts as of June 24, 2016 (last week): The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2016 is 2.6 percent on June 24, down from 2.8 percent on June 17. The forecast for second-quarter real residential investment growth declined from 3.6 percent to 1.7 percent yesterday (June 23, 2016) after the U.S. Census Bureau released data on new home sales, prices, and construction costs. The forecast for the contribution of inventory investment to second-quarter growth declined from -0.41 percentage points to -0.53 percentage points after this morning's (June 24, 2016) advance durable manufacturing report from the Census Bureau.

First Quarter GDP Revised Higher, But Still Paltry - First quarter GDP was given its final revision up to a gain of 1.1%. The prior revision was a gain of only 0.8%. Bloomberg was calling for a gain of 1.0%, with an Econoday range of 0.9% to 1.2%. Dow Jones (Wall Street Journal) was calling for a 1.0% gain as well, and ditto for Reuters. The deflator, or the price index, actually dropped to 0.4% from the prior revision of up 0.6%. Bloomberg was calling for the 0.6% number to remain static. Unfortunately, that is just another incidence of stubbornly low inflation. Tuesday’s key revisions showed strength in net exports and less nonresidential fixed investment weakness. Exports added more than one-tenth of a point on a net basis exports were higher in the first quarter and while imports were weak. Another upward revision was seen in software, which helped to mitigate some of the weakness in the nonresidential investment. The component for personal consumption expenditures was lowered by more than two-tenths due to weaker spending for services. Residential investment added roughly a half-point to the first quarter GDP reading. Inventories were a two-tenths of a point drag on GDP, but that could mean more stocking needs to be seen ahead. Tuesday’s report may sound alright on the surface, but investors and economic watchers need to understand that this is still dismally slow. This sort of growth should not be conducive to massive job growth, and the economy is nearing full employment (if you don’t count the uncounted). The uncertainty around the Brexit impact will weight on estimates, but the bulk of that will be in the third and fourth quarters as the Brexit news hit with only one week left in the second quarter.

Q1 2016 GDP Revised Upward to 1.1% - Robert Oak - Q1 GDP was revised upward to 1.1%. Originally GDP was estimated to be 0.5%, then revised up to 0.8% and now reported to be 1.1%. While consumer spending was revised somewhat lower again, exports came to the rescue and bumped up Q1 GDP. Private investment contraction was less than originally estimated as well. Now GDP is still weak but not anything to be concerned about. Seems revisions always change the economic growth story and Q1 is no exception. As a reminder, GDP is made up of: Y = C + I + G + (X-M)where Y=GDP, C=Consumption, I=Investment, G=Government Spending, (X-M)=Net Exports, X=Exports, M=Imports*. GDP in this overview, unless explicitly stated otherwise, refers to real GDP. Real GDP is in chained 2009 dollars. The below table shows the Q1 GDP component contribution revisions and their percentage point difference. As one can see exports was the big change. The below table shows the GDP component comparison in percentage point spread from Q4 to 2016 Q1. With this latest revision the change is not so bad. Consumer spending, C was revised downward over a quarter of a percentage point. The downward revision was almost all services of various kinds. Below is a percentage change graph in real consumer spending going back to 2000. Graphed below is PCE with the quarterly annualized percentage change breakdown of durable goods (red or bright red), nondurable goods (blue) versus services (maroon). Imports and Exports, M & X really saved the day with a 0.33 percentage point upward swing from the 2nd revision. Goods exports was revised up by 0.30. Imports were revised downward and added an additional 0.05 percentage points to GDP. Government spending, G contributed 0.23 percentage points to Q1 GDP with Federal spending subtracting -0.11 percentage points from GDP while state and local governments added 0.34 percentage points, an upward 0.03 percentage point revision. Investment, I is made up of fixed investment and changes to private inventories. The change in private inventories alone was a -0.23 percentage point contribution. Below are the change in real private inventories and the next graph is the change in that value from the previous quarter. Fixed investment is residential and nonresidential was revised upward to be only a -0.06 percentage point GDP contribution. Nonresidential was much less of negative on GDP, revised upward to a -0.58 percentage point contribution from -0.81. Within nonresidential investment, equipment was still horrific subtracting over half a percentage point of GDP. Residential fixed investment now added 0.52 percentage points to GDP. The below graph shows residential fixed investment. Nominal GDP: In current dollars, not adjusted for prices, of the U.S. output,was $18,230.1 billion, a 1.4% annualized increase for Q1 from Q4. In Q4, current dollar GDP increased 2.3%, showing Q1's growth was stunted when not adjusting for inflation.

Third Estimate 1Q2016 GDP Revised Upward. Corporate Profits Up. - The third estimate of first quarter 2016 Real Gross Domestic Product (GDP) was revised upward to 1.1 %. This improvement was mainly due to upward revisions to residential fixed investment and to exports according to the BEA.. Headline GDP is calculated by annualizing one quarter's data against the previous quarters data (and the previous quarter was relatively strong in this instance). A better method would be to look at growth compared to the same quarter one year ago. For 1Q2016, the year-over-year growth is 2.1 % - an improvement from 4Q2015's 2.0 % year-over-year growth. So one might say that the rate of GDP growth better than the previous quarter.What the BLS says about the revision from the second to the third estimate: The upward revision to the percent change in real GDP primarily reflected upward revisions to exports and to nonresidential fixed investment that were partly offset by a downward revision to PCE. For more information, see the Technical Note. For information on revisions, see "The Revisions to GDP, GDI, and Their Major Components." In the same release, corporate profits data was released showing less growth. Profits from current production (corporate profits with inventory valuation adjustment [IVA] and capital consumption adjustment [CCAdj]) increased $34.7 billion in the first quarter, in contrast to a decrease of $159.6 billion in the fourth. Profits of domestic financial corporations decreased $11.3 billion in the first quarter, compared with a decrease of $24.0 billion in the fourth. Profits of domestic nonfinancial corporations increased $72.9 billion, in contrast to a decrease of $129.2 billion. The rest-of-the-world component of profits decreased $26.9 billion, compared with a decrease of $6.5 billion. This measure is calculated as the difference between receipts from the rest of the world and payments to the rest of the world. In the first quarter, receipts increased $8.7 billion, and payments increased $35.6 billion. Taxes on corporate income increased $4.4 billion in the first quarter, in contrast to a decrease of $32.2 billion in the fourth. Profits after tax with IVA and CCAdj increased $30.3 billion, in contrast to a decrease of $127.4 billion. Dividends increased $8.2 billion in the first quarter, in contrast to a decrease of $15.1 billion in the fourth. Undistributed profits increased $22.1 billion, in contrast to a decrease of $112.2 billion. Net cash flow with IVA -- the internal funds available to corporations for investment -- increased $33.6 billion, in contrast to a decrease of $101.6 billion.

Final Q1 GDP Rises 1.1% Despite Worst Personal Consumption In Two Years - And so the final, and largely irrelevant, estimate of Q1 GDP is in the history books. Moments ago the BEA reported that in the first quarter GDP rose a tepid 1.1%, higher than the first and second estimates of 0.5% and 0.8%, respectively, and also higher than consensus estimates of 1.0%. So far so good. The only problem is that the all important personal consumption expenditures component of GDP rose a modest 2.0% annualized, missing expectations of a 2.1% print, a 1.5% sequential increase, and a contribution of just 1.02% to the bottom line GDP. This was the worst showing by the US consumer since Q1 of 2014 and confirms that the spending power of the US consumer which accounts for 70% of GDP, is getting increasingly worse. So where were did the positive changes come from? Virtually all other components:

Fixed Investment was found to have subtracted only -0.06% from Q1 GDP, better than the -0.25% in the previous estimate

Private Inventories were largely unchanged at -0.23%

Exports were surprisingly revised higher from a negative 0.25% to contribution of 0.04%, which meant that net trade instead of subtracting 0.2% from the bottom line GDP print actually added 0.1%. It is curious how the US had a favorable trade balance at a time when global trade is contracting at the fastest pace since the financial crisis.

Government consumption was also largely unchanged at 0.23%.

More details from the report: The deceleration in real GDP in the first quarter primarily reflected a deceleration in PCE, a larger decrease in nonresidential fixed investment, and a downturn in federal government spending that were partly offset by upturns in state and local government spending and exports and an acceleration in residential fixed investment. Real gross domestic income (GDI), which measures the value of the production of goods and services in the United States as the costs incurred and the incomes earned in production, increased 2.9 percent in the first quarter, compared with an increase of 1.9 percent in the fourth. The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 2.0 percent in the first quarter, compared with an increase of 1.7 percent in the fourth. Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever produced -- increased 0.9 percent in the first quarter, compared with an increase of 1.5 percent in the fourth. The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 0.2 percent in the first quarter, compared with an increase of 0.4 percent in the fourth. Excluding food and energy prices, the price index for gross domestic purchases increased 1.4 percent, compared with an increase of 1.0 percent.

Will America Win or Lose From Brexit? - Simon Johnson – The British vote to leave the European Union has shaken world financial markets. The immediate and medium-term prospects for economic growth in the United Kingdom are severely diminished, and the impact on the rest of Europe will be negative. Some of the obvious political winners from Brexit are people who do not like Western Europe and what it stands for. Ironically, the United States – Europe’s greatest ally and the EU’s largest trading partner – may also end up as a beneficiary, though not if Donald Trump, the presumptive Republican nominee, wins the presidential election in November. Britain has a population of just over 65 million people and what was, at least until Thursday, the world’s fifth-largest national economy, with annual GDP totaling nearly $3 trillion. In the context of a $75 trillion global economy, Britain’s is a relatively small, open one that relies heavily on foreign trade – annual exports are typically in the range of 28%-30% of economic activity. That is now likely to change. The EU accounts for about half of Britain’s exports, and the prospects for continued full market access are dim. Trade in goods may be affected, but the impact on exports of services – including financial services – will be more severe. In principle, Britain could now negotiate a great deal of market access, but this would almost certainly require accepting rules made in Brussels – which is just what the British voted against. Growth in the UK will consequently be lower and for a long period of time. The direct impact on the world economy is likely to be limited by the fact that other countries will to some extent gain from Britain’s loss. For example, the UK was until recently one of the top destinations for foreign direct investment, precisely because companies saw it as a good base from which to sell into the rest of Western Europe. The UK’s attractiveness – and the creation of good jobs that resulted from it – will now decline.

Why Brexit Really Is a Big Deal for the U.S. Economy -- Rana Foroohar -- Politicians and technocrats of all stripes are trying to reassure Americans that Britain’s vote last week to leave the EU won’t affect them economically. They are wrong. Britain is the main channel through which America expresses its economic and political will in Europe. Its exit from that stage will undoubtedly make it harder to assert any American agendas around trade, digital privacy, global tax reform and such in Europe. But the folks who are telling us not to worry about the economic effects of Brexit on the U.S. have also missed a key, immediate impact of the decision – the Fed has kept interest rate hikes on hold in large part due to the turbulence abroad, and may be forced to do so now for much longer than it would like. That’s something I’ve been worried about for some time, and my worry has only grown after reading the newly released Bank of International Settlements annual report, which focused on the “persistence of exceptionally low interest rates,” part of a “risky trinity” of conditions that is endangering global growth, along with low productivity levels and high debt. As the BIS report, which is much read amongst investors and global policy makers, put it, “exceptionally accommodative [monetary] policies in place are reaching their limits. The balance between benefits and costs has been deteriorating,” as evidenced by things like growing corporate debt (companies have taken on a record amount of it since low interest rates encourage it) as well as surveys showing that not only would many consumers be unlikely to bolster their consumption if rates remain this low (or lower), they may even be encouraged to save more because of worries about what near zero rates portend about the strength of the recovery.

July 2016 Economic Forecast: Outlook Continues Slightly Recessionary. Too Early To Factor In Brexit Impact.: Econintersect's Economic Index continues marginally in contraction but insignificantly improved. The index is slightly above the lowest value since the end of the Great Recession. Although Econintersect does not buy into proposition that Brexit is bad for the global economy, the financial markets do - and their reaction may cause a recessionary dynamic. For those alive in 1973 will remember that the oil embargo triggered a recession. Global events can contract the USA economy. This index is not designed to guess GDP - or the four horsemen used by the NBER to identify recessions (industrial production, business sales, employment and personal income). It is designed to look at the economy at main street level. A general concern to this author is that current data is being compared against relatively soft historical data - both month-over-month and year-over-year. The data should be showing more comparative strength. Reflecting on the potential that a recession is underway (or soon to be underway) - I find the prospect unlikely (but far from impossible). It is more likely the economic dynamics have slowed from "muddling along" to a "snails pace". The only group forecasting better economic growth is the self serving forecasts of the Federal Reserve (as they are held accountable for monetary policy) - as well as the components of GDP which do not translate to a better world for those on mainstreet. For the near future, one will need a microscope and a micrometer to measure any improvement. Our employment six month forecast discussed below is forecasting slightly weaker employment growth for July - and the long term decline in the employment forecast remains in play.

Economy Is Rigged, Most Americans Say: Unemployment in America may have hit a forty-year low, but few Americans are taking comfort in numbers. According to a new poll, nearly three-quarters of Americans believe the U.S. economy is rigged. A national study, coconducted last May by Marketplace and Edison, asked 1,022 participants about numerous aspects of their financial lives, ranging from job hunts and medical bills to the date of their most recent family vacation. The survey results produced a grim portrait of economic anxiety that is crossing class, race, and political boundaries.According to the survey, 32% of Americans say they lose sleep over their financial situation, and 48% of Americans believe the economy for the next generation of Americans will be worse than that of the present. Even more jarring is the finding that 71% of Americans believe “the economic system in the U.S. is rigged in favor of certain groups.” 61% of Hispanic and 71% of White/Other respondents shared this belief, while over 80% of African Americans agreed with the statement.The respondents’ outlook on the current political climate is just as bleak. 75% said they were “dissatisfied” or “angry” with elected officials in Washington, while 47% were “not satisfied at all” with this year’s selection of candidates for president. Indeed, almost half of respondents believed that the choice of a Republican or Democrat for the White House would make “no difference” to their personal financial situation.

US Treasury Yields Hit New Record Lows -- With bond yields across the rest of the developed world already making new record lows every day, only the US had so far refused to take out all time lows set back in 2012. That finally changed overnight when the 10Y Treasury dropped -9 bps to 1.3784%, while the 30Y declined by the same amount, sliding as low as to 2.1914%. The underlying dynamic for the bond demand is the same as that which has pushed all other bond yields to record lows: yields are plunging to record-low levels from the U.S. and Japan to the U.K., as a result of expectations of more QE by central banks, something which was confirmed by the US yesterday. "In the Tokyo market, there’s no interest rate, and there’s turmoil in the euro area,” said Yoshiyuki Suzuki, the head of fixed income in Tokyo at Fukoku Mutual Life Insurance Co., which has $63.4 billion in assets. “Money is escaping to the Treasury market." However, the specific catalyst which helped push both Bund and US TSY yields higher, was a Reuters report that contrary to what Bloomberg reported yesterday, the ECB is not currently considering buying government debt out of proportion to euro zone countries' shareholding in the bank and the hurdle for abandoning this capital key is high.

Why ‘Fix the Debt’ Just Can’t Quit Paul Ryan - Jon Chait --Last week, House Republicans released a plan for a gigantic, regressive tax cut. Since gigantic tax cuts increase the budget deficit, you would think an organization devoted to the singular mission of reducing the deficit would oppose it. But no. The anti-deficit lobby Fix the Debt released a statement ofqualified praise, which I ridiculed. Fix the Debt responds with a new, brief defense of its position. What its argument actually reveals is its denial about the state of the Republican Party. Here is the relevant portion of Fix the Debt’s response: Paul Ryan’s Plan for Everything: Hide the NumbersNew York Times Finally Stops Repeating Trump Steaks LieWe don’t endorse the plan, but we do welcome it because it puts tax reform on the agenda in Washington. It also moves in the right direction by eliminating or limiting many of the tax breaks that complicate the tax code and shrink the tax base. Tax reform should contribute to deficit reduction, and definitely not increase deficits. We hope that the new plan will spur discussion and bipartisan negotiation on reform that will simplify the tax code, make the country more competitive, and help to fix the debt. The nub of the argument is that the Republican plan, while admittedly imperfect, “moves in the right direction.” But if you define the right direction as reducing the debt, then the plan doesn’t move in the right direction. It moves in the wrong direction. The Republican plan is for massive cuts in tax rates, including the complete elimination of the estate tax. It is true that the proposal gestures vaguely in the direction of closing loopholes and expenditures, but it does not define what these would be. What’s more, the plan’s authors have made clear that the proposal will be a net tax cut.

Obama signs FOIA reform bill - POLITICO: President Barack Obama signed a bill Thursday aimed at improving the government's often-sluggish responses to Freedom of Information Act requests. As the president put his signature on the measure in the Oval Office, he portrayed the legislation as largely an effort to make permanent changes his administration instituted in the handling of FOIA requests. "Congress -- on a bipartisan basis -- has provided the tools -- legislation -- to codify some of the reforms we've already made and to expand more of these reforms so that government is more responsive," Obama said. "And I am very proud of all the work we've done to try to make government more open and responsive, but I know that people haven't always been satisfied with the speed with which they're getting responses and requests. Hopefully this is going to help and be an important initiative for us to continue on the reform path." The bill, called the FOIA Improvement Act, codifies a presumption of disclosure that Obama re-instituted at the outset of his presidency, but which requesters say has done little to make recalcitrant agencies fork over information. That presumption is now in law and may give requesters a stronger hand in court, although it's unclear how much stronger since similar court-authored precedents are already on the books. The bill also makes it harder for government to withhold certain kinds of information that's more than 25 years old, although the impact of that provision was narrowed as the legislation pinged back and forth between the House and Senate.

Hacked Emails Reveal NATO General Plotting Against Obama on Russia Policy - Retired U.S. Air Force Gen. Philip Breedlove, until recently the supreme commander of NATO forces in Europe, plotted in private to overcome President Barack Obama’s reluctance to escalate military tensions with Russia over the war in Ukraine in 2014, according to apparently hacked emails from Breedlove’s Gmail account that were posted on a new website called DC Leaks. Obama defied political pressure from hawks in Congress and the military to provide lethal assistance to the Ukrainian government, fearing that doing so would increase the bloodshed and provide Russian President Vladimir Putin with the justification for deeper incursions into the country. Breedlove, during briefings to Congress, notably contradicted the Obama administration regarding the situation in Ukraine, leading to news stories about conflict between the general and Obama. But the leaked emails provide an even more dramatic picture of the intense back-channel lobbying for the Obama administration to begin a proxy war with Russia in Ukraine. In a series of messages in 2014, Breedlove sought meetings with former Secretary of State Colin Powell, asking for advice on how to pressure the Obama administration to take a more aggressive posture toward Russia.

Millions Off the Books: The FBI’s Hidden Surveillance Budget: When Deputy FBI Assistant Director James Burrell told a workshop roundtable about the Operational Technology Division’s (OTD) budget, he didn’t give precise figures. Instead, he said the Bureau has “hundreds of millions of dollars” to spend on law enforcement and national security. The workshop was on "Encryption and Mechanisms for Authorized Government Access to Plaintext," and was sponsored by The National Academies of Science, Technology, and Medicine. The program sought to determine whether it is possible to maintain digital security while giving the federal government access to secure devices. It has been reported that the OTD, which handles the FBI’s surveillance technology, had a budget of $600 to $800 million last year, but Bureau officials haven’t given an exact number. Burrell explained that the budget had to be put "into context," as funding is often split between law enforcement and national security activities. Given that the specifics of some technology is classified, "Sometimes we’re not able to use the technology we develop for one side equally on the other."He said the OTD focuses its energies on developing technology "specifically for use in investigations," and that the division is one of the Bureau’s main technical fields, along with its core IT capacity. US Senate Fails to Pass Amendment Expanding FBI’s Surveillance Capabilities The FBI has gone to great lengths to keep its surveillance technology secret, even to the point of throwing out criminal cases so they won’t have to reveal their tactics.

Democrats Reject Platform Proposal Opposing Trade Deal - Democrats on Friday voted down an amendment to the party's platform that would have opposed the Trans-Pacific Partnership trade deal, avoiding an awkward scenario that would have put its statement of values at odds with President Barack Obama. Members of a Democratic National Convention drafting committee defeated a proposal led by Rep. Keith Ellison, D-Minn., that would have added language rejecting the Pacific Rim trade pact, which has been opposed by presidential candidates Hillary Clinton and Bernie Sanders. The panel, which is developing the party's platform ahead of next month's Philadelphia convention, instead backed a measure that said "there are a diversity of views in the party" on the TPP and reaffirmed that Democrats contend any trade deal "must protect workers and the environment." The panel approved language calling for the abolition of the death penalty, calling it "a cruel and unusual form of punishment which has no place" in the nation. Clinton said during a debate earlier this year that it should only be used in limited cases involving "heinous crimes," while Sanders said the government should not use capital punishment. Reflecting Sanders' advocacy, the platform also calls for the expansion of Social Security and says Americans should earn at least a $15 an hour, referring to the current minimum wage of $7.25 an hour as a "starvation wage," a phrase the Vermont senator often uses. Sanders has pushed for a $15-an-hour minimum wage, while Clinton has supported efforts to raise the minimum wage to that level but has said states and cities should raise the bar as high as possible. Sanders' allies wanted the draft to specify that the $15 minimum wage should be indexed with inflation. But Clinton's side struck down the amendment, noting that the document already included a call to "raise and index the minimum wage."

Betraying Progressives, DNC Platform Backs Fracking, TPP, and Israel Occupation - Despite its claims to want to unify voters ahead of November’s election, the Democratic party appears to be pushing for an agenda that critics say ignores basic progressive policies, “staying true” to their Corporate donors above all else. During a 9-hour meeting in St. Louis, Missouri on Friday, members of the DNC’s platform drafting committee voted down a number of measures proposed by Bernie Sanders surrogates that would have come out against the contentious Trans-Pacific Partnership (TPP), fracking, and the Israeli occupation of Palestine. At the same time, proposals to support a carbon tax, Single Payer healthcare, and a $15 minimum wage tied to inflation were also disregarded. In a statement, Sanders said he was “disappointed and dismayed” that representatives of Hillary Clinton and DNC chairwoman Debbie Wasserman Schulz rejected the proposal on trade put forth by Sanders appointee Rep. Keith Ellison (D-Minn.), despite the fact that the presumed nominee has herself come out against the 12-nation deal.

Clinton Forces Dominate DNC Platform, Demolishing Key Sanders' Issues - The Real News Network -- (video & transcript) The Democratic party platform will not oppose the TPP, ban fracking, call for the end to the illegal Israeli settlements and occupation of Palestinian land, or tie a $15 minimum wage to inflation - positions advocated by the Bernie Sanders delegates. "Bernie Sanders has in fact painted himself into a spot that leaves very little room for him to move," said Glen Ford, executive editor of the Black Agenda Report. "And he painted himself into that corner at the beginning of the race when he said that he would support the nominee. If he's going to support the nominee, well, what kind of shape does that take? He will support the nominee unless he doesn't like the platform? No, he didn't equivocate on that. And that's why I say that the Hillary people are calling his bluff. If he hews to his commitment to support her come what may, well, we know what's coming: a platform like this, a corporate kind of campaign." Ford said the Bernie delegates can now make a critical choice: support the Clinton campaign, or head down the road of independent politics. "They can legitimize that kind of hoodwinking of the people, these progressives wolfs in progressive clothing. Or they can do the really hard work which must be done, which demands to be done, and that is the creation of a party that actually does represent the values and political positions that these millions of folks have fought for. Either create a new party out of scratch, and it would be a social democratic party, or build on an already existing social democratic party, which is the Green Party."

Explaining The ‘Revolt’ Against the TPP (video) The 2016 political races are being buffeted by “a transpartisan, nationwide trade revolt” against trade deals that have been rigged to benefit wealthy corporations at the expense of the rest of us, says Lori Wallach, director of Public Citizen’s Global Trade Watch, in this Burning Issues video. Wallach has been a leading voice against the Trans-Pacific Partnership, which President Obama is attempting to push through Congress even though both the presumptive Republican and Democratic presidential nominees have come out in opposition, as have key leaders in both parties of Congress. Wallach explains that previous deals that form the “template” for the 12-nation TPP – such as the Korea-U.S. free trade agreement President Obama signed in 2011 – have had the opposite effect of what White House officials promised, with lost jobs and declining exports, Wallach said. “A good agreement would get rid of all of the corporate boondoggles that have gotten Super-Glued onto the good name of trade,” such as the investor-state dispute settlement process that allows corporations to sue governments before a tribunal of three private attorneys “to raid our Treasury for any law they don’t like.” A trade agreement should also encourage competition in areas like pharmaceuticals, instead of discouraging generic equivalents for high-priced brand-name drugs, and would ensure that the United States can ban products that do not meet U.S. safety or labor standards, Wallach says.

Investor-to-state dispute settlement is a rigged system -- Investor-to-state dispute settlement (ISDS), the most controversial element of the proposed trade agreement with the US, has characteristics of a rigged system. ISDS gives the US an unfair advantage, we can not expect EU companies to win ISDS cases against the US. Trade agreements including ISDS would lock-in the EU, as it is practically impossible to withdraw from trade agreements. ISDS is controversial. Investment agreements with ISDS give foreign investors, usually multinationals, the right to circumvent domestic courts and challenge decisions of states for international investment tribunals if decisions may lead to lower profits than expected. These ISDS tribunals can review all decisions of the state, all decisions of governments, legislators and courts, including supreme courts and human rights courts. For-profit arbitrators decide the ISDS cases and can award unlimited damages. Multinationals can challenge reform of copyright and patent law, challenge privacy measures, challenge environmental and health policies. For an introduction see Stiglitz (2013) or Vrijschrift (2014). For intellectual property rights and human rights see FFII (2014).The ISDS system lacks conventional institutional safeguards for independence: tenure, prohibitions on outside remuneration by the arbitrator and neutral appointment of arbitrators. The for-profit arbitrators are paid at least 3000 dollar a day. This creates perverse incentives: accepting frivolous cases, let cases drag on, let the only party that can initiate cases win to stimulate more cases, pleasing the official that can appoint arbitrators. The appointment of arbitrators is not neutral. One arbitrator is appointed by each of the disputing parties. In which supreme court can parties bring their own judge? The third arbitrator, the presiding arbitrator, is appointed by agreement of the disputing parties.

Trump Just Drove a Truck Through Hole DNC Platform Panel Left in Clinton's TPP Promise- Laying bare how dangerous it could be for Democrats to ignore populist opposition to corporate-friendly "free trade" deals, Republican presidential nominee Donald Trump on Tuesday attacked Hillary Clinton for her stance on trade in general and the Trans Pacific Partnership (TPP) in particular. Speaking in Monessen, Pennsylvania, Trump said the "TPP would be the death blow for American manufacturing" and vowed to "withdraw" the U.S. from the agreement. He said Clinton took "a leading part" in drafting the 12-nation deal, noting that the former secretary of state "praised or pushed the TPP on 45 separate occasions, and even called it the 'gold standard,'" according to prepared remarks. "Hillary Clinton was totally for the TPP just a short while ago, but when she saw my stance, which is totally against, she was shamed into saying she would be against it too," he said. "But have no doubt, she will immediately approve it if it is put before her, guaranteed. She will do this just as she has betrayed American workers for Wall Street throughout her career." With this claim, MSNBC reporter Alex Seitz-Wald wrote on Twitter, Trump appeared to be "speaking directly to [Bernie] Sanders supporters." Sanders has made opposition to the TPP and other rights-trampling deals a cornerstone of his campaign. Trump also said he would renegotiate the North American Free Trade Agreement (NAFTA)—and placed partial blame for that deal also at Clinton's feet. "It was Bill Clinton who signed NAFTA in 1993, and Hillary Clinton who supported it," he said.

Five Takeaways From Donald Trump’s Trade Speech -- Donald Trump used a big speech Tuesday at a metals-processing plant in western Pennsylvaniato put more detailed policy meat on the bones of what critics have seen as his off-the-cuff brand of protectionism. Using a written script and a Teleprompter, Mr. Trump sought to tie Hillary Clinton and her husband to the North American Free Trade Agreement, or Nafta, which he described as unmitigated bane to the American economy. Here are some top takeaways from that speech.

Elites created globalization, and average people have suffered. Mr. Trump blamed U.S. economic problems and the trade deficit—$746 billion last year—on a “leadership class that worships globalism over Americanism.” In Mr. Trump’s argument, manufacturing jobs have evaporated because political leaders have embraced global institutions, international rules and freely flowing trade, rather than focusing on boosting competitive industries back home..

Trump invokes Sanders, warns Clinton would liberalize trade. Like Mr. Sanders, Mr. Trump pointed out Mrs. Clinton’s previous support while secretary of state for the Trans-Pacific Partnership, the big Pacific trade agreement Mr. Obama is seeking to get through Congress, and he challenged her to “unconditionally rule out its passage in any form.”.

Trump reveals policy details but rolls back the protectionism. Previously Mr. Trump has threatened to slap double-digit across-the-board tariffs on China, Japan and Mexico over what he considers to be their unfair trade practices. But Tuesday’s speech contained more restrained warnings to China and other U.S. trading partners, including specific presidential authority for tariffs and previous examples of duties imposed on trading partners, going back to the Reagan administration. .

Nafta is in the crosshairs. On Tuesday he vowed to seek a renegotiation of Nafta in a way that helps American workers or use his presidential powers to withdraw from the pact, a step that could have a devastating impact on the U.S. auto industry and other sectors. .

Deals with a single nation favored over regional and global affairs. Mr. Trump showed he’s aligned with conservatives in favoring bilateral trade agreements—limited pacts between two nations—rather than multilateral affairs such as the TPP, which many conservatives and some liberals fear would erode American sovereignty. “

The Trump trade scam - Yesterday, presumptive Republican nominee Donald Trump gave a speech on trade, extensively citing EPI’s research which shows that trade deficits as a result of NAFTA and other trade deals, as well as trade with China, have cost U.S. jobs and driven down U.S. wages. It’s true that the way we have undertaken globalization has hurt the vast majority of working people in this country—a view that EPI has been articulating for years, and that we will continue to articulate well after November. However, Trump’s speech makes it seem as if globalization is solely responsible for wage suppression, and that elite Democrats are solely responsible for globalization. Missing from his tale is the role of corporations and their allies have played in pushing this agenda, and the role the party he leads has played in implementing it. After all, NAFTA never would have passed without GOP votes, as two-thirds of the House Democrats opposed it. Furthermore, Trump has heretofore ignored the many other intentional policies that businesses and the top 1 percent have pushed to suppress wages over the last four decades. Start with excessive unemployment due to Federal Reserve Board policies which were antagonistic to wage growth and friendly to the finance sector and bondholders. Excessive unemployment leads to less wage growth, especially for low- and middle-wage workers. Add in government austerity at the federal and state levels—which has mostly been pushed by GOP governors and legislatures—that has impeded the recovery and stunted wage growth. There’s also the decimation of collective bargaining, which is the single largest reason that middle class wages have faltered. Meanwhile, the minimum wage is now more than 25 percent below its 1968 level, even though productivity since then has more than doubled. Phasing in a $15 minimum wage would lift wages for at least a third of the workforce. The most recent example is the effort to overturn the recent raising of the overtime threshold that would help more than 12 million middle-wage salaried workers obtain overtime protections.

Lame Duck TPP Push Hands Trump A Powerful Issue Against Clinton - More and more the word is getting out that President Obama, along with the giant multinational corporations and Wall Street, will launch a push in Congress to pass the Trans-Pacific Partnership (TPP) during the “lame duck” legislative session following the election. President Obama should put a stop to this talk right now. It hands Republican presidential nominee Donald Trump a powerful issue to use against – and embarrass – Hillary Clinton, should she become the Democratic nominee. The Los Angeles Times has a story, “Obama races to cement the big Pacific Rim trade deal that all his potential successors oppose,” that includes this: The most optimistic timeline in Congress appears to be for the deal to come to a vote in the lame duck session. Obama predicted recently lawmakers might vote after at least the primary election season had ended. This story is one of many in various outlets covering administration, business and other sources describing a coming effort to push TPP through Congress after the election. A few examples:

Wall Street Journal, May 24: “Obama Reasserts Hope for TPP Passage This Year“: “The goal is, I think, to try to complete TPP by the end of this year,” Mr. Obama said.…. The White House hopes Republican leaders will help pass the TPP in a lame-duck session before Mr. Obama leaves office in January…

The Hill, May 6: “President Obama urging Congress to pass TPP“: The Obama administration is working closely with lawmakers on Capitol Hill to build support for the 12-nation Trans-Pacific Partnership (TPP), arguing that delaying votes on the deal will make it harder to pass the agreement, the president said in a Washington Post op-ed. … Congressional leaders have said that the deal won’t likely be considered until the lame-duck session after the November elections.

The Hill, April 25: “Chamber’s Donohue: TPP vote likely after the elections“: U.S. Chamber of Commerce President Tom Donohue said Monday that election-year pressures will force the Senate to vote on the Trans-Pacific Partnership (TPP) during a lame-duck session to protect several vulnerable Republican incumbents.

Hillary Clinton Hints at Giant, Trump-Like Giveaway to Corporate America - Hillary Clinton gave a big speech in Raleigh on her plans for the economy on June 22. It was full of Bernie Sanders-like rhetoric about “outrageous behavior” by business and Wall Street. But it also included a dog whistle that only huge multinational corporations would hear, telling them that she plans to deliver on one of their greatest dreams and slash their longterm taxes by hundreds of billions of dollars. Here’s what Clinton said: Let’s break through the dysfunction in Washington to make the biggest investment in new, good-paying jobs since World War II. … In my first 100 days as president, I will work with both parties to pass a comprehensive plan to create the next generation of good-paying jobs. Now, the heart of my plan will be the biggest investment in American infrastructure in decades, including establishing an infrastructure bank that will bring private sector dollars off the sidelines and put them to work here. An infrastructure bank to rebuild America’s tattered infrastructure is a reasonable idea, and was also proposed by Barack Obama when he was running for president in 2008. Certainly America’s tattered roads, bridges and sewers desperately need an upgrade. The question is where the money for it would come from. Republicans would never let it be paid for with borrowed money, and in 2011 they blocked a proposal by Obama to fund it with a surtax of 0.7 percent on incomes over $1 million. But last year, behind the scenes, Speaker of the House Paul Ryan, R-Wis., and Sen. Chuck Schumer, D-N.Y., quietly tried to lay the groundwork for a classic Washington, D.C., bipartisan solution — i.e., the kind of deal that both parties’ big donors adore and regular Americans would despise, if they ever heard about it.

Elizabeth Warren Opens Broad Attack Against Rent-Seeking Oligopolists Like Amazon, Apple, Google, Walmart, Comcast -- Yves Smith - While the media has been obsessed with Elizabeth Warren acting as the new heavy in the Clinton campaign against Donald Trump, it has curiously neglected a front she and other progressives are opening against powerful companies that are strong backers of the Clinton presidential bid. She has called out some of the most powerful companies in America as having too much economic power and has called for them to reined in. At a minimum, this suggests that Warren has not fallen into Clinton’s orbit, nor is operating under a delusion as far as the likelihood of her becoming Vice President is concerned, despite some unseemly behavior, like at one point stating her willingness to take the job. Warren and Trump have a strong mutual antipathy. Warren will be able to play a more influential role in a Clinton administration than in a Trump administration whether she is offered a post or not. And as we’ve pointed out, reading some of the Clinton e-mails that Wikipedia has posted online, Clinton surrounds herself with sycophants. It may be that Warren has decided she needs to play up to Clinton for a bit, particularly after having held out from endorsing her for what the narcissistic Clinton team not doubt deemed to be an unacceptably long amount of time. So while we can’t be sure, Warren’s recent fawning behavior may simply be playing up to Clinton’s ego so as to secure some bargaining chips for later use.The text of the speech is at the end of the post. You can see it is mass audience friendly but hit hard on the central issue of concentration of power in multiple fields, including drug stores, airlines, technology, and publishing, and the damage that does.

Bill Clinton up to his old tricks in meeting with Loretta Lynch - Bill Clinton reminded America what the future will look like if Hillary Clinton — his wife and enabler — is elected president of the United States. What Bill did the other day in meeting privately with Attorney General Loretta Lynch while his wife is under federal investigation wasn't ostentatious. Bill didn't want to beat his breast and hold a news conference. He wasn't as loud, say, as the hair of the barbarian Donald Trump. And Bill wasn't as loud as the relentless American liberal shaming of the English over the Brexit vote. It looks like Bill Clinton wanted to be quiet, subtle and ambiguous, like the Clintons were years ago when he was president. And it is the way they will conduct their business should Hillary command the White House, with Bill at her side as first laddie of the United States. They're sidewinders, these two. So the other day Bill Clinton learned that Lynch was at the airport in Phoenix. Bill walked onto her private plane to chat with her privately for about a half an hour. Lynch later said they didn't discuss the investigation of Hillary: "Our conversation was a great deal about grandchildren, it was primarily social about our travels and he mentioned golf he played in Phoenix." Note the operative word: Primarily. You could drive a fleet of dump trucks through "primarily." Don't you just love it when lawyers talk dirty?

Bill Clinton’s Airport Meeting With Attorney General Casts More Distrust of Elites: A rigged system of justice that protects elites was a constant theme under President Obama’s former U.S. Attorney General at the Justice Department, Eric Holder, who failed to prosecute a single Wall Street bank executive over the epic corruption that led to the financial collapse in 2008. Now, President Obama’s newest head of the Justice Department, Loretta Lynch, has come under withering criticism for conducting a private meeting with former President Bill Clinton on her government plane at the Phoenix Sky Harbor International Airport while his wife, presidential candidate Hillary Clinton, is under an active criminal investigation by her office for transmitting classified government material over her private email server while Secretary of State in the Obama administration. President Obama’s two terms have been filled with personnel from the Bill Clinton presidency, leading to the appearance of continuity government between the two camps. Loretta Lynch was appointed by Bill Clinton in 1999 during his Presidency to head the U.S. Attorney’s office for the Eastern District of New York, where she worked until 2001. According to her official bio, she joined the corporate law firm, Hogan & Hartson LLP (now Hogan Lovells) in 2002 and remained there until January 2010 when President Obama nominated Lynch to once again head the U.S. Attorney’s office for the Eastern District of New York. The American Lawyer reported in 2008 that while Lynch was employed as a partner at Hogan & Hartson, a tax attorney at that firm, Howard Topaz, handled the Clintons’ tax returns since at least 2004. According to the article, the law firm was also a major contributor to Hillary Clinton’s political campaigns.

Taxes: Fund the IRS! : Democracy Journal: Will anyone remember the dramatic turnabout in tax policy that began when Barack Obama took office? Considering the awful economic conditions that prevailed, and the announced intention of Republican Congressional leaders to make his presidency fail, Obama’s successes in tax policy are nothing short of astonishing. They are also little known because of the generally poor quality of mainstream news coverage about his actions as well as Obama’s failure to toot his own horn. President Obama’s first priority was to use the income tax system to get cash flowing to Americans, especially those on the bottom half of the income ladder. Ever the practical politician, he was willing to throw in tax breaks for business to placate congressional Republicans so his proposal would become law.Seven-plus years later, as Obama’s second term comes to an end, those on the highest rungs of the income ladder are paying a significantly larger share of their incomes in taxes, while decades-old loopholes and rules that made the corporate income tax a profit center for multinationals were tightened somewhat. All the dire warnings that Obama’s tax policies, including those related to the Affordable Care Act, would sink the economy turned out to be utterly wrong. By the spring of 2016 the economy had a record 73 straight months of private-sector job growth and 14.4 million jobs added, more than all of Europe combined in the same period. As a result, total government revenues when adjusted for inflation rose on Obama’s watch by 57 percent, while the annual budget deficit fell by two-thirds. Revenues from individual income taxes were up 78 percent and especially robust corporate profits resulted in a 175 percent increase in corporate income tax revenues.

3. The plan simplifies the treatment of capital gains anddividends. The House GOP tax plan would replace the current treatment of capital gains and dividends with a simpler calculation method: a 50 percent exclusion.

4. The plan reforms the treatment of foreign-source income. The House GOP tax plan would move to a territorial tax system, which would eliminate most of the complicated tax rules regarding overseas income. At the same time, it would make the corporate income tax border-adjustable, an elegant and simple way to discourage corporations from avoiding U.S. taxes by shifting their income overseas.

5. The plan moves tofull expensing of capital investments. The House GOP plan would eliminate the entire depreciation system by allowing businesses to deduct the full cost of their capital investments immediately, a tax change known as full expensing.

All five of these features of the House GOP tax plan would make the U.S. tax code substantially simpler. However, the plan also contains at least one feature that would make the tax code more complicated: the 25 percent maximum tax rate on “small business income.” Under the House GOP tax plan, individuals would be subject to a 33 percent top tax rate on most of their income, including wages and salaries. The problem with this provision is almost immediately apparent. If the House GOP tax plan were passed in full, there would almost certainly be a scramble to recategorize wages as pass-through business income (and possibly a slew of new IRS regulations to curb this). As a result, the 25 percent maximum tax rate on pass-through businesses is one of the few features of the House GOP tax plan that would add complexity to the tax system, rather than simplifying it.

Paul Ryan’s tax reform taps noted fiscal policy experts Donald Trump and Sam Brownback -- Last Friday, Speaker Paul Ryan released his long awaited tax reform proposal, the final piece of the House GOP’s election year agenda, “A Better Way.” This agenda, as Ryan noted, is meant to highlight the policies Republicans are for, not simply what they are against. So what kind of tax reform are Republicans for? It will come as no surprise that the consensus view of House Republicans is that tax reform means more tax cuts for the rich (a point I’ll highlight more in later posts). What is surprising, however, is how Paul Ryan and the House GOP propose cutting taxes for the rich. Ryan has decided that the House GOP should take tax advice from noted fiscal policy experts Sam Brownback and Donald Trump. Specifically, Ryan’s House GOP tax reform agenda creates a new loophole for “pass-through” income. Pass-through entities are businesses whose incomes are not taxed at the corporate level, but instead “passed through” entirely to the business owners and then taxed at their individual income tax levels. Trump’s tax plan called for cuts to the top individual income rate that would reduce it from today’s 39.6 percent to 25 percent. But, on top of this already generous tax cut for the very top, he also introduces a special, lower rate for pass-through income—15 percent.

Paul Ryan’s tax plan is just a shift toward less obvious tax breaks for the rich -- Paul Ryan’s election-year tax reform agenda shocked some people with its 33 percent top marginal income tax rate on earned income. This is much lower than today’s rates—or even what prevailed after the George W. Bush tax cuts—but at the same time, it’s high relative to the world of wildly unrealistic Republican tax plans. Have Republicans realized that slashing taxes on the rich won’t lead to booming growth and hence be self-financing? Or have they realized that they shouldn’t exacerbate inequality by continuing to fight tooth and nail for enormous tax cuts for the rich? Sadly, no, they are still fighting for enormous tax cuts for the rich—they’re just being a bit more subtle about it now. One example of this subtlety was detailed in my previous post: the 33 percent statutory rate masks the fact that high-income individuals could easily pay a top rate of 25 percent under Ryan’s plan by simply reclassifying their income as pass-through income. So the extent to which the House Republican caucus is no longer calling for drastic cuts to top marginal income tax rates is highly exaggerated. They’ve simply traded in their very-apparent tax reductions for less-obvious tax loopholes. Another example highlights how House Republicans are doubling down on tax breaks for an even-richer subset of high income individuals—people who make their income from capital earnings instead of working. The Ryan tax plan drastically slashes taxes on both corporate income and income from capital gains, dividends, and interest. It cuts the corporate income tax to 20 percent and shifts the United States to a territorial system that would spur income shifting and tax avoidance. I’ll discuss the effects of those proposals in a later post, but for now I want to focus on Ryan and the House GOP’s 50 percent exclusion on income earned from capital gains, dividends, and interest.

U.S. top one percent of income earners hit new high in 2015 amid strong economic growth - Emmanuel Saez - The top 1 percent income earners in the United States hit a new high last year, according to the latest data from the U.S. Internal Revenue Service. ... The latest IRS data show that incomes for the bottom 99 percent of families grew by 3.9 percent over 2014 levels, the best annual growth rate since 1998, but incomes for those families in the top 1 percent of earners grew even faster, by 7.7 percent, over the same period. After a large decline of 11.6 percent from 2007 to 2009, real incomes of the bottom 99 percent of families registered a negligible 1.1 percent gain from 2009 to 2013, and then grew by 6.0 percent from 2013 to 2015. Hence, a full recovery in income growth for the bottom 99 percent remains elusive. Six years after the end of the Great Recession, those families have recovered only about sixty percent of their income losses due to that severe economic downturn. In contrast, families at or near the top of the income ladder continued to power ahead. The share of income going to the top 10 percent of income earners—those making on average about $300,000 a year—increased to 50.5 percent in 2015 from 50.0 percent in 2014, the highest ever except for 2012. The share of income going to the top 1 percent of families—those earning on average about $1.4 million a year—increased to 22.0 percent in 2015 from 21.4 percent in 2014. Income inequality in the United States persists at extremely high levels, particularly at the very top of the income ladder. ... This is unfortunately on par with a long-term widening of inequality since 1980, when the top 1 percent of families began to capture a disproportionate share of economic growth. The latest data from the IRS suggests the 2013 reforms proved to be fleeting in terms of reducing income inequality. There was a dip in pre-tax income earned by the top one percent in 2013, yet by 2015 top incomes are once again on the rise—following a pattern of growing income inequality stretching back to the 1970s.

Standing on Backs of Global Poor, Filthy Rich Getting Even Filthier --The wealth gap keeps growing as the world's richest get richer at the expense of the poor, according to a new study released this week by an alliance of major organizations. The World Wealth Report from Oxfam, Greenpeace, and other groups found that while the total number of millionaires in the world jumped to 15.4 million—up by nearly 5 million since 2009—more than 702 million people remain in poverty around the globe. "For every person with more than $30 million, there are over 4800 people living in extreme poverty," said Jenny Ricks of the Fight Inequality Alliance. "This gross inequality is a symptom of an unjust and unfair economic system that allows the rich to get richer at the expense of the poor." Some of the findings include:

Global HNWI [High Net Worth Individual] wealth expanded fourfold over the last 20 years to reach US$58.7 trillion in 2015.

Against the backdrop of growing inequality in many countries, Asia-Pacific surpassed North America to become the region with the largest amount of HNWI wealth. Faltering growth in the Americas has slowed the overall rate of HNWI wealth expansion.

Japan and China are the engines of both Asia-Pacific and global growth.

Global HNWI wealth is projected to surpass US$100 trillion by 2025.

The Real Brexit "Catastrophe": World's 400 Richest People Lose $127 Billion - For all the scaremongering and threats of an imminent financial apocalypse should Brexit win, including dire forecasts from the likes of George Soros, the Bank of England, David Cameron (who even invoked war), and even Jacob Rothschild, something "unexpected" happened yesterday: the UK was the best performing European market following the Brexit outcome. This outcome was just as we expected three days ago for reasons that we penned in "Is Soros Wrong", where we said "in a world in which central banks rush to devalue their currency at any means necessary just to gain a modest competitive advantage in global trade wars, a GBP collapse is precisely what the BOE should want, if it means kickstarting the UK economy."On Friday, the market started to price it in too, and in the process revealed that the biggest sovereign losers from Brexit will not be the UK but Europe. Not only, though. Because as we noted yesterday in "Who Are The Biggest Losers From Brexit?", there is an even bigger loser than the EU: Britain and Europe's wealthiest people. Britain’s 15 wealthiest citizens had $5.5 billion erased from their collective fortune Friday after the country voted to leave the European Union. It wasn't just Britain: as Bloomberg added overnight, the world’s 400 richest people lost $127.4 billion Friday as global equity markets reeled from the news that British voters elected to leave the European Union. The billionaires lost 3.2 percent of their total net worth, bringing the combined sum to $3.9 trillion, according to the Bloomberg Billionaires Index. The biggest decline belonged to Europe’s richest person, Amancio Ortega, who lost more than $6 billion, while nine others dropped more than $1 billion, including Bill Gates, Jeff Bezos and Gerald Cavendish Grosvenor, the wealthiest person in the U.K.

The $100 Trillion Bond Market’s Got Bigger Concerns Than Brexit - In some ways, it really didn’t matter to Steven Major whether the U.K. voted to stay or to leave. Major, who’s proven to be something of a savant as HSBC Holdings Plc’s head of fixed-income research, says Brexit is ultimately little more than a sideshow. Long after the din from the U.K. vote subsides (and regardless of what happens in the U.S. presidential election), Major says issues that, at times, have been decades in the making will conspire to depress global growth and keep rates at rock-bottom levels for years to come. “The real elephant in the room is not the U.K. vote or a Trump presidency,” Major said. “The real elephant in the room is we’ll have low and negative rates for a very long period of time.” While the Brexit vote roiled financial markets and caused a surge in haven demand, Major says investors in the $100 trillion bond market need to look at deeper structural problems plaguing the world: demographics, the explosion of debt globally and the disparity in wealth between the rich and poor. Low rates are also a natural consequence of too much government borrowing after the financial crisis. While it gave economies a much-needed boost, the debt burden robbed many countries of their spending power, which could have supported growth over the next decade. And without a pickup in growth, there’s every reason to believe that investors will continue to seek out the safety of government bonds. For U.S. Treasuries, the global benchmark for borrowing, Major says yields on 10-year notes will remain pinned close to current levels and end the year at 1.5 percent. That’s below all other forecasts compiled by Bloomberg last week, which, on average, show that Wall Street sees yields starting to rise.

10-Year Treasury Yield Hits Record Low as Investors Seek Safety -- Yields on U.S. government bonds fell to new lows on Friday, the latest record in this year's rally in sovereign debt around the world. The bid yield on the benchmark 10-year Treasury note fell to 1.385% during European morning trade, briefly breaking below its previous intraday record of 1.389% hit on July 24, 2012, according to Tradeweb. The yield closed at a record low of 1.404% that day. Yields fall as bond prices rise. The yield recently hit 1.422%, according to Tradeweb, still down around 0.07 of a percentage point on the day. Yields on U.K. government bonds also fell to fresh lows on Friday. Bond yields have fallen broadly this year, reflecting investors' concerns about soft global growth and low inflation. Negative interest rates in Japan and Europe, and central banks' purchases of government bonds, have also pushed down yields. The rally has intensified since Britain voted to leave the European Union last week, heightening concerns about the global economy and driving investors to safe assets like government bonds. Traders say lower global bond yields partly reflect growing expectations that major central banks will need to take fresh action to spur growth, and that the Federal Reserve may not be able to raise interest rates this year. Rising rates tend to hurt the value of outstanding bonds.

Buybacks by Companies Like Apple May Signal Danger, Not Growth - IPhone sales are down and Apple has run into obstacles in China, its second-most-important market. Investors have beaten down Apple’s once highflying shares this year, and the company’s troubles have been a drag on the entire stock market.But Apple and the stock market would probably be in worse shape now if not for an important factor: Companies like Apple have been buying billions of dollars’ worth of their own shares at a record-breaking pace, returning money to shareholders even as earnings lag.This is a bit of a puzzle because many studies have shown that using cash for buybacks generally doesn’t improve a company’s operations or add to its intrinsic value. But spending money on buybacks is much better than wasting it on money-losing projects, when corporations don’t have other good uses for the cash. And by reducing the number of shares on the market, buybacks make earnings per share look better. That helps executives to big paydays as they more easily reach their compensation targets, and it often nudges up short-term share prices, returning money to rank-and-file shareholders.At the moment, corporate America is sitting on an enormous cash hoard. Many companies have been using the money in an epic share-buying spree — one that has increased in intensity even as earnings have declined. In the 12 months through March, operating earnings for the companies in the Standard & Poor’s 500-stock index dropped to $854.9 billion from $989 billion, but buybacks increased to $589 billion from $538.1 billion. That is the largest total for buybacks ever in a 12-month period, according to a report from Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

Private Equity Expert/Reformer Opposes California Treasurer Chiang’s Now-Phony “Fee Transparency” Bill -- Yves Smith - As we wrote last week, it’s become apparent that the private equity fee transparency bill that California Treasurer announced last year and launched this year was never intended to live up to its billing. We explained how one of the big reasons to require comprehensive reporting of private equity fees is that the fund managers, aka “general partners,” forced the companies that they buy with investors’ money to enter into agreements with their firm or affiliates that allows them to syphon money out of these companies. If you think that’s an exaggeration, consider this section of a post Secret Fees, Private Jets, and the Pension Crisis by Illinois state senator Daniel Biss, who is sponsoring a much tougher private equity disclosure bill in that state: When the fund manager controls a company, they can do what they want with it — including charging it for all sorts of “services” such as flying around in a private jet. I’ll say that again: Leonard Green & Partners takes TRS’s money, buys a company with it with the purpose of increasing the company’s value to benefit TRS [Illinois’ Teachers Retirement System], and then instead tells the company “I happen to own a private jet and I’m going to make you reimburse me for the cost of flying my own employees around in it”. …there are a variety of other types of fees, such as “portfolio company fees” (situations like the Leonard Green private jet payments I described), “monitoring fees” and others, that are usually completely undisclosed to the public, and often only partially disclosed (at best!) to the pension fund itself. This stuff really matters. Pension funds pay hundreds of millions of dollars to alternative investment managers, and fees are almost completely secret from the public, and only partially understood by the funds themselves. At the same time, as will surprise exactly nobody besides the self-interested defenders of the status quo, fees and investment structure are very important in predicting net returns.

Return on Investment’: The Narrow, Short-Sighted Finance Concept That Has Taken Over Society -- What’s a good use of money? For investors, that question comes down to a relatively straightforward calculation: Which of the available options has the greatest expected return on the investment? But investors are far from the only people who are using the “return on investment” framework to weigh different options. “This has become a very, very powerful tool for decision making, not only in business, but in our culture as a whole,” said Moses Pava, an ethicist and a dean of the Sy Syms School of Business at Yeshiva University, at the Aspen Ideas Festival, co-hosted by the Aspen Institute and ​The Atlantic. In particular, Pava sees this kind of thinking dominating the world of education, both on the part of students in choosing schools and majors, and on the part of school in how they market themselves to potential enrollees. This, he says, will not end well for liberal arts schools. Undergraduate business schools have a pretty strong case to make for their value—if by value people mean an average starting salary right after graduation. Now, Pava says, a lot of liberal arts schools are trying to make that same case, saying they too provide a high return on investment. “But the bad news for the liberal arts people,” Pava argued, “is that once they’ve entered that conversation with [business schools] and started comparing themselves to us, they’ve lost the game, because they’re using our metaphor and they’re using our way of framing the question and they’ve kind of lost their soul.” The fundamental problem with return-on-investment thinking is that it reduces the value of an experience to some sort of quantifiable, short-term outcome. Pava says he sees this in “assessments of learning,” which seek to measure what information students are absorbing. But such assessments miss some of the most profound learning, the kind that takes years to sink in.

Old and New Capture - RegBlog -- Although it is well known that regulatory capture can subvert the public interest, it is becoming increasingly clear that there are two forms of capture that can affect the performance of regulatory agencies. The “old capture”—which is what most of us think of when we think of regulatory capture—occurs when regulators become so co-opted by the regulated entities or special interests they are supposed to regulate that they end up working to advance those interests instead of the public interest articulated in their statutory mission. In the “new capture,” regulators attempt to serve the public interest, but they are stymied by procedural requirements that have gummed up the regulatory process and by deep budget cuts that make it more difficult to comply with those requirements. Both forms of capture subvert the public interest, but it is important to distinguish between them for purposes of fashioning appropriate remedies. The old capture is associated with the public choice literature, which hypothesizes that regulators put their self-interest ahead of the public interest. For example, regulators may not pursue the public interest because they previously worked for industry and intend to return (“the revolving door” problem), or they want to get a job in industry after government service. Administrators may also be reluctant to regulate, in light of a desire to please elected officials who depend on industry contributions for reelection. Reforms to address the old capture include regulation of the revolving door, greater regulatory transparency, and conflict-of-interest regulations. . By comparison, addressing new capture requires a very different approach—which is why it is important to distinguish between the two forms. As a preliminary matter, it is necessary to identify and reduce unnecessary procedural burdens. After doing so, increasing agency budgets would better enable agencies to satisfy those procedural requirements that remain and empower them to resist or overcome the pressures that they face from special interests. Since the budgets of regulatory agencies are only a small fraction of the federal budget, budget increases would have no significant impact on the federal budget or the federal deficit.

Regulatory Capture in Enforcement | RegBlog - "Regulatory capture” sounds like something totally at odds with the rule of law. It implies that officials favor specially placed interests. When seeking to identify and understand regulatory capture, however, the important questions are who is doing the capturing, and what sort of decisions flow from the conquest. These inquiries turn out to be more complicated than much of the commentary about regulatory capture suggests.This is especially true for an aspect of administrative decisionmaking that is less often associated with the notion of capture: enforcement. Enforcement is a major component of administrative action. It takes place in the context of formal prosecution—a setting that rightly is counted as part of the administrative process, subject to the same sorts of pressures and practical problems that affect a broad array of executive functions. Enforcement also takes place through actions by agencies that are primarily associated with licensing, such as the Federal Communications Commission (FCC); after all, a licensing system has to be backed up with actions that implement the rules for getting licensed and enforce the conduct required of, or prohibited for, licensees. Television and radio licenses, for example, have been subject to non-renewal—or, in extreme cases, revocation—for violation of FCC rules.Enforcement takes place as well in the context of agencies’ regulating, adjudicating, and enforcing rules that are designed to make businesses more fair, effective, or protective of consumer interests (such as the U.S. Securities and Exchange Commission and the Federal Trade Commission). In any of these contexts, enforcement officials have to balance the costs of an action against its expected benefit. That benefit might be evaluated in terms of its impact on public interests. Or it might be evaluated in terms of the narrower interests of the individual official or agency.

Prosecuting Corporate Criminals - RegBlog -- It is difficult to escape the inference that the Great Recession, which caused and even still continues to cause much suffering, was in substantial part the result of fraudulent misconduct, whereby dubious loans were camouflaged as highly rated securities, thus creating a classic “bubble.” Yet, even though the government, after much delay, finally brought legal actions against some of the large financial institutions involved in this fraud, few prosecutions or regulatory proceedings have been brought against the individuals who actually perpetrated the fraud—much less against any high-level executives who initiated, approved, or blindly disregarded the fraud. This, then, raises the question, why have the individuals who inflated that bubble not yet been brought to justice? There are several possible reasons for the dearth of individual prosecutions. For one, prosecutors may simply lack the stamina, will, and resources to bring cases against individuals. To trace a complicated fraud all the way up to those who approved the conditions that created it typically takes years, with no guarantee of ultimate success. By contrast, large institutions cannot afford to be at war with the government for any extended period of time, and so will, sooner rather than later, “cut a deal.” Such deals provide prosecutors with ready-made, politically appealing press packages: they can publicly trumpet that they have reached an agreement with some large company or financial institution that is going to pay a hefty fine, increase internal compliance measures, and agree to be monitored. The upshot is that, over the past decade, the and a variety of regulatory agencies increasingly have focused their energies on cutting deals with large companies, rather than pursuing difficult and time-consuming investigations of high-level individuals.

Six Big Items on the Next Fincen Director's Agenda — After the departure of Financial Crimes Enforcement Network's director last month, the future of the Treasury Department unit remains the subject of fierce speculation within the financial services industry. Jennifer Shasky Calvery was a former prosecutor in the Justice Department before taking the Fincen job, and set a new path for the agency in many respects, with a focus more on its law enforcement capacity. It's unclear if the next director will follow that course. "Treasury will be sending a signal as to how seriously they take anti-money laundering efforts, depending on who they name," said Ross Delston, an AML expert based in Washington. "Is it viewed as the reward for good service to a long-time stalwart, or is it an agency that needs to be revitalized and re-energized with the appointment of somebody who's already a subject-matter expert?" Following are some of the big issues facing Calvery's successor:

Fincen as Enforcer. By repurposing certain Fincen tools, Calvery cemented the agency's role as an enforcer, according to Duncan Levin, a former federal prosecutor.

Analytics Capacity. Calvery has been hailed for modernizing Fincen's data-processing unit. "The quality of their analytical work [for law enforcement agencies] has improved," said Dennis Lormel, a former head of the FBI's financial crimes unit.

"Black-hole" SARs. One of the perennial issues facing Fincen is the criticism that SARs produced by credit unions and banks are not used by law enforcement officials or anyone else. "There's always the perception that SARs go into a black hole and you never hear about them again, but that's not the case," said Lormel.

Culture of Compliance. In August 2014, Fincen published an advisory that encouraged "promoting a culture of compliance," with institutions directed to improve their AML programs by better educating leadership, ensuring compliance departments were sufficiently funded and encouraging communication on the issue.

Following Fintech. Fincen must also wrestle with the anti-money laundering requirements of fintech firms and banks that do business with them, including digital currency, the blockchain and other innovations.

Beneficial ownership: Part II. One sizable accomplishment during Calvery's tenure was the May final rule requiring banks to identify beneficial ownership of companies that own accounts.Though the rule took four years to finalize, many argue that it is riddled with loopholes, including a grandfathering clause, low identification standards and exemptions for certain industries.

Bernie Sanders: Democrats Need to Wake Up - NYTimes - Surprise, surprise. Workers in Britain, many of whom have seen a decline in their standard of living while the very rich in their country have become much richer, have turned their backs on the European Union and a globalized economy that is failing them and their children. And it’s not just the British who are suffering. That increasingly globalized economy, established and maintained by the world’s economic elite, is failing people everywhere. Incredibly, the wealthiest 62 people on this planet own as much wealth as the bottom half of the world’s population — around 3.6 billion people. The top 1 percent now owns more wealth than the whole of the bottom 99 percent. The very, very rich enjoy unimaginable luxury while billions of people endure abject poverty, unemployment, and inadequate health care, education, housing and drinking water. Could this rejection of the current form of the global economy happen in the United States? You bet it could. During my campaign for the Democratic presidential nomination, I’ve visited 46 states. What I saw and heard on too many occasions were painful realities that the political and media establishment fail even to recognize. In the last 15 years, nearly 60,000 factories in this country have closed, and more than 4.8 million well-paid manufacturing jobs have disappeared. Much of this is related to disastrous trade agreements that encourage corporations to move to low-wage countries. Despite major increases in productivity, the median male worker in America today is making $726 dollars less than he did in 1973, while the median female worker is making $1,154 less than she did in 2007, after adjusting for inflation. Nearly 47 million Americans live in poverty. An estimated 28 million have no health insurance, while many others are underinsured. Millions of people are struggling with outrageous levels of student debt. For perhaps the first time in modern history, our younger generation will probably have a lower standard of living than their parents. Frighteningly, millions of poorly educated Americans will have a shorter life span than the previous generation as they succumb to despair, drugs and alcohol. Meanwhile, in our country the top one-tenth of 1 percent now owns almost as much wealth as the bottom 90 percent. Fifty-eight percent of all new income is going to the top 1 percent. Wall Street and billionaires, through their “super PACs,” are able to buy elections.

Reuters Poll: Equity Allocations Hit 5-Year Low in June (Reuters) - Global investors bought real estate, added to cash holdings and cut equity allocations to the lowest in at least five years as this month's shock Brexit vote added to an already toxic mix of sluggish world growth and volatile markets. The monthly Reuters survey of 44 fund managers and chief investment officers in the United States, Europe, Japan and Britain was conducted between June 15-29, straddling the June 23 referendum in which Britons voted to leave the European Union. The verdict, which drove sterling to 31-year lows and wiped $2 trillion off world stocks, heralds intense political and economic uncertainty for the UK, with likely repercussions for the euro zone as well as the rest of the world. Close to two-thirds of poll responses were received after the vote, but many of those who responded beforehand said they had positioned defensively, given the uncertainties already roiling world markets. This includes the looming U.S. presidential election which could bring victory for Republican Donald Trump - an outcome that two-thirds of those who responded to a special question said would have negative consequences. Allocations to cash stood at 6.8 percent on average, having risen every month since February and the highest since last June, the survey showed. In almost every region, investors dumped shares, with the average global holding at 45 percent, the lowest since before May 2011 at least and down from nearly 50 at the end of last year. European funds' equity allocations hit the lowest in over four years.

Why Private Equity Does Not Outperform --Yves Smith - Investors in private equity and other “alternative” investments cling to the canard that they deliver superior returns. Mind you, in the case of private equity, that was true once upon a time. In the 1980s, making money busting up undervalued, overly diversified conglomerates was like shooting fish in a barrel. Even in the 1990s, private equity, which is at its core just a levered play on equity markets, rose on the surging tide of dis-inflation-goosed stock market valuations. But institutional investors, particularly those with long-term time horizons like pension funds and life insurers, have been desperately chasing anything that even dimly offers the hope of outperformance as QE and ZIRP put real yields on safe investments in negative territory. Even so, they’ve come to recognize that some of their hoped-for salvations, like hedge funds, routinely failed to deliver.Yet investors remain loyal to private equity, even though industry chieftans have warned that returns in the next few years will fall from current levels. And it’s not as though those results are as attractive as the PR would have you believe. We’ve stressed that public pension funds ave fallen short of their benchmarks for the last ten years, and in most cases, for the sub-periods in that time frame. That means investors are not being paid enough for the risks they are assuming. We have given other, more detailed and technical critiques of-hyped private equity performance. A new report by ValueWalk (hat tip DO) does a terrific job of putting the key issues together in a tidy package. I strongly urge you to read the entire article in full. It uses 2014 overview of recent studies on private equity performance by Steven Kaplan and Berk Sensoy as its point of departure. Note that we’ve discussed the most important recent studies touted as favorable to private equity in earlier posts (see here, for example).The recap of the Kaplan/Sensoy paper:

Is Bitcoin Money? Florida Judge to Decide | American Banker: — Whether bitcoin is actual currency is at the forefront of a first-of-its-kind money-laundering case in Florida to be decided Friday. In February 2014, Michel Espinoza was arrested in a Miami Beach motel for agreeing to sell $30,000 worth of bitcoin to an undercover police officer he had met on an exchange site called LocalBitcoins.com. Prosecutors charged that Espinoza violated Florida statutes on money laundering and for operating an unlicensed money transmitting business. But the defense has argued that these laws do not apply to Espinoza's case, because he was not selling currency — he was selling bitcoin. "It's just like you selling your own personal property," Rene Palomino Jr., Espinoza's attorney, said in a court filing. "Since bitcoins are 'goods,' Espinoza's alleged conduct is excluded from the definition of the term 'money transmitter' " under both state and federal law. The case highlights a conundrum that has confused digital currency companies and state regulators alike: how to deal with a digital asset that is not a legal tender but can still hold value. "Florida is dealing with the same definitional issues that many other states are dealing with, and that is how the terms currency, money, money transmission and even monetary value are defined,"

Too Many Crypto Coin Crowd Sales Could Crowd Out True Innovators | Bank Think - Initial coin offerings are the latest fad for many emerging cryptocurrency companies and projects. From the recently completed Lisk, Waves and Mycelium coin offerings to the historic crowd sale by the DAO — which was subsequently hacked for about $60 million — to Bitland, Project Decorum, Elastic Project and a good number more sales, the trend is clear. Cryptocurrency organizations are viewing their initial coin offerings as an opportunity to build capital and to provide a near-seamless method to distribute a percentage of their digital coins in exchange for a vested interest or stake in the organization. The stake in the corporation will naturally vary from offering to offering. ICOs are similar to initial public offerings issued by corporations: They are essentially the first sale of stock in the form of an organization's cryptocurrency. ICOs can be bought with fiat currency or with another digital currency at a set exchange rate. Unlike what may be found in a typical IPO — especially the most popular ones such as last year's Ferrari, First Data and FitBit IPOs — an ICO lets people of all classes and ethnicities participate because of the low barrier to entry. Further, the sale occurs online, so it's borderless. The entire phenomenon is an interesting mechanism carried out by cryptocurrency developers who have recognized the potential of digital currency and decentralizing technology. However, most if not all cryptocurrency varieties now emerge with esoteric blockchain-based features, capabilities and/or applications. Therefore, coin offerings are also pigeonholed by existing within a niche sector: anything blockchain-based. Sure, there are many ways you can subdivide or subcategorize cryptocurrencies. However, the resounding and important question is: Can every blockchain-based project to emerge produce something innovative and of future value?

Bitcoin May Open Markets, Won't Hurt Incumbents: Citi Report - The bitcoin blockchain poses a negligible competitive threat to legacy institutions, but the technology could open up new markets for financial services, says a new report by Citigroup equities analysts. The technology could help card networks like Visa or MasterCard and money transfer services like Western Union operate more efficiently, the June 30 report says. More importantly "the power behind an open network like Bitcoin is the possibility of incorporating it with other technologies to bring about true innovation." For example, the bitcoin blockchain allows mobile phone providers, especially in regions with high populations of financially excluded people, to help "provide the unbanked with low-cost digital banking products," the Citi analysts wrote, highlighting the work of bitcoin startups Circle, which provides a peer-to-peer payments app; Abra, a remittance service focused on financial inclusion; and BitPesa, a payment and trading platform for Africa. "Cryptocurrencies' potential impact will likely be more from its ability to open up new markets and reach new customers," the report said. Further, although the report doesn't deem cryptocurrencies disruptive, it said a central bank issued digital currency could, in theory, threaten private-sector banks' role in the payments system, "but this seems to be a very long tail risk." The Citi report also dismissed the internal "digital currency" being developed at Mitsubishi UFJ Group as one that's effectively a currency backed token amounting to nothing but prepaid money. This was Citi's third blockchain research report. The previous two focused on use cases in securities settlement and global transaction banking.

Three Fintech Reforms the Government Must Champion | Bank Think -- Recently, the White House invited representatives from the government, nongovernmental organizations and the private sector to discuss how technology and regulation can unite to produce financial services that are more competitive, efficient and fair. I was honored to be in attendance and represent the international money transmitter Remitly.Already, technology is making everything from international money transfers to mortgages more accessible and affordable. However, the summit brought to light a number of shared challenges. To overcome them, championing the following three policy proposals would help ensure that regulation enables, rather than impedes, the full promise of financial technology.

Federal charter for nonbanks: an idea whose time has come. Many innovative financial services companies, including my own, are not banks. These money service businesses are governed by an uneven patchwork of state regulations. The licensing effort required to establish a national footprint can cost millions of dollars and take years to complete. Even once licensed, ensuring ongoing compliance with a multitude of state and federal requirements imposes substantial costs and pitfalls.

Whose financial transaction data is it anyway? The consumer's. When I make a bank or credit card purchase, I can easily access my detailed transaction history simply by logging into my account. Given my consent, authorized software programs like Mint.com should be able to access all of my accounts and consolidate my financial activity in a place of my choosing in order to perform useful functions on top of my data.

Improve immigration policy. Immigrants have founded 51% of the most successful startups in the United States. Yet, we're shutting out bright, talented people from living and working in this country. While other countries are passing laws to make themselves more attractive to talented, foreign-born workers, the United States turns away more than half of all foreign-born Ph.D.s graduating from U.S. universities in science, technology, engineering and math fields.

Mobile Authentication Guide Is a Weak Half-Measure -- Smartphone web use is far outpacing computer-based internet surfing. More Google searches are already conducted on mobile devices than on desktops. As consumers continue to increase their engagement with smartphones, they are subjected to the same cyberscams that they were subjected to on desktops and laptops. But mobile banking users are at much greater risk than those using online banking websites. That is because mobile security controls are failing to address issues like social engineering and mobile bot attacks — all part of the new arsenal used by hackers to gain control of mobile devices. Recently, the Federal Financial Institutions Examination Council issued a set of guidelines for mobile security, marking an update to previous regulations issued in 2011 and in 2005. The regulations lay out expectations and specifics for entities that accept payments over the internet. While the newest guidelines address some of the more recent developments in mobile security, they still leave many issues unresolved. Hackers targeting mobile devices, for instance, can have a field day with remote access tool attacks (known as RATs), which let them take advantage of some of the features implemented by mobile device manufacturers and app developers to make interfacing with apps and sites easier. In an era when users get dozens of notifications on their devices each day, few people think twice before opening a notification or clicking on a link. Hackers can use either of those methods to install a remote access tool to access a device and let them independently log on to a website or open an app.

The Recent Rise in Delinquency Rates on Bank Loans Is Shocking (Is a New Banking Crisis Imminent?) -- The delinquency rate on loans is key in understanding banking. It answers one question: what percentage of loans is overdue for payment? The delinquency rate is by far the most useful indicator for “credit stress.” It seems, however, as if delinquency no longer counts. Few are paying attention to the quick and sudden rise of the delinquency rate. What does it tell us and is a new banking crisis imminent? The last time around, it took Fed-chairman Alan Greenspan over two years and seventeen rate hikes to bring the Fed funds rate from a then all-time-low of 1% to 5.25%, before the U.S. economy suffered the worst recession since the 1930s. We are not so lucky this time. Today, the Federal Reserve is ignoring a very inconvenient truth: the global economy is much more fragile than the last time around. And we have no teaser rates in today’s subprime credit (unless we of course consider oil producers that hedged oil prices by buying futures as something akin to “teaser rates”). This time around, we will certainly not need seventeen rate hikes or three years before pushing the economy into recession. In fact, we now know what happened after Janet Yellen increased the Fed funds rate with a mere quarter-percentage point: the delinquency rate on commercial and industrial loans increased 50%. That is right. In a single quarter delinquency rates in the U.S. banking sector exploded from 1% to 1.5%. The cycle has turned.

House Committee Releases Full Text of Dodd-Frank Rollback Legislation -- The House Financial Services Committee yesterday released the full text of the Financial Choice Act, a nearly 500-page bill aimed at rolling back the Dodd-Frank Act’s extensive supervisory regime and providing regulatory relief for banks of all sizes. The bill’s chief architect, committee Chairman Jeb Hensarling (R-Texas), first introduced the plan in a speech earlier this month. At the core of the proposed legislation is a regulatory “off-ramp” from the DFA and Basel III supervisory regimes for all banks that elect to maintain a 10 percent non-risk weighted leverage ratio and have composite CAMELS ratings of 1 or 2. Qualifying banks would be exempt from certain rules and regulations that limit mergers, acquisitions or other transactional activities whenever those limitations are based upon capital or liquidity standards, or upon regulators’ assessment of systemic risk. The regulatory relief provided by the bill would be contingent upon the bank maintaining the specified leverage ratio and ratings. Another key component of Hensarling’s plan is ensuring no institution is “too big to fail” by stripping the Financial Stability Oversight Council’s authority to designate firms as systemically important and replacing DFA’s Orderly Liquidation Authority provision with a new Bankruptcy Code designed to accommodate the failure of a large, complex financial institution. Additionally, it significantly restricts the Federal Reserve’s ability to make discounted loans or bail out financial firms or creditors. The bill further details plans to overhaul and demand greater accountability from the various federal regulatory agencies, including the Consumer Financial Protection Bureau; impose more stringent penalties for Wall Street in cases of fraud or deception; and repeal sections of Dodd-Frank that limit capital formation, including the Volcker Rule.

Hensarling Bill Gives Credence to 'Capital Is King' | Bank Think: Announcing his plan to overhaul the Dodd-Frank Act, House Financial Services Committee Chairman Jeb Hensarling signaled agreement with a growing list of policymakers and scholars who argue that the best way to prevent another financial crisis is to embrace simpler, higher capital requirements rather than other prescriptive regulations that just burden banks and limit economic growth. The very first section of the Financial CHOICE Act offers banks an "off-ramp" from existing regulatory requirements for those firms meeting a new "well-capitalized" standard. The threshold for obtaining the exemption is a 10% leverage ratio, in which a firm's capital is measured against its assets without any risk weights affecting the calculation. To be clear, Hensarling is proposing a more rigorous capital standard than any in recent U.S. history. While banks today must comply with a leverage ratio, capital requirements used both by U.S. regulators and in the Basel Committee largely favor risk-based capital ratios, which factored in the recent crisis.. Not only does the Hensarling off-ramp cast off the risk-based method, but his proposed leverage ratio is higher than under current regulation. Hensarling's proposal favors a tougher hurdle, requiring large banks interested in the off-ramp to raise more capital or further simplify their balance sheets. Many community banks, however, would have less trouble meeting the standard if they have not already. Yet from a broader perspective, the legislation shows a growing realization that stronger capital requirements alone may have been a more effective, and simpler, solution to regulatory reform than the prescriptive regulatory approach implemented by Dodd-Frank. That line of thinking is echoed in a recent article (co-authored by one of us) arguing that if Dodd-Frank had stopped at sections 606 and 607, which effectively require financial holding companies to maintain "well-capitalized" instead of "adequately capitalized" levels, that might have been a sufficient starting point for reform.

Five Ideas to Improve Dodd-Frank | Bank Think: Many banks deeply believe that the Dodd-Frank Act has harmed financial institutions, blocked potential pro-consumer innovations and must be repealed. In contrast, many experienced consumer groups believe that Dodd-Frank, if only it had been fully and effectively implemented, would have produced millions more affordable home loans, eliminated payday lending while providing affordable, effective alternatives, and that the fault lies largely with the banking industry and often with the regulators. We, the member of the National Diversity Coalition, stake out a more nuanced view. Our members include the largest black and Latino churches and a broad range of minority chambers of commerce and nonprofits. We have an alternative perspective that does not focus on blaming banks, regulators or anyone else. Our focus — one that we hope the new Congress will at least partially embrace after this year's election — is that blaming the government or the industry or some other target mentioned in the rhetorical debate over the economy is unlikely to benefit the 70% of Americans who live paycheck to paycheck. Banks should be profitable, but consumers must also be protected and be able to benefit from economic growth. Some of the ideas and potential legislative proposals that will be discussed include:

A near-blanket exemption from onerous and costly regulatory burdens for banks that are not "systemically important"

A reduction in regulatory burdens for banks that commit to and achieve "Outstanding" Community Reinvestment Act ratings.

Revisions in the CRA rating system to address a 21st-century digital banking industry that can secure the support of millennials and the new "Generation Z" beginning to graduate high school.

Strategies to create at least 10 to 20 competitive large in each U.S. region, without necessarily breaking up "too big to fail" banks.

Special incentives to banks that successfully develop services and products that substantially diminish the number of unbanked and underbanked, and warmly welcome the 70% of Americans who live from paycheck to paycheck into a modern 21st century banking system.

Brexit 'Extraordinarily Dangerous' for U.S. Banks | American Banker: Although fears of a possible vote by the United Kingdom to leave the European Union had been growing, most U.S. analysts and bankers believed the chances of the "Brexit" push succeeding were unlikely. But after Britain shocked the world by voting Thursday in favor of secession, global markets quickly plunged into turmoil. The value of the British pound plummeted and bank stocks got hammered. "This is an extraordinarily dangerous situation," . The only bright spot for U.S. banks is that they appear better prepared for shocks, based on the results from the Dodd-Frank Act stress tests completed on Thursday. The test — which anticipated a severe economic downturn — was harder than last year's, yet big banks scored better. "If any institutions are prepared for it, it's the U.S. [big banks] — see yesterday's results and be comforted," Petrou said. "That said, stresses are now only partially reflected in DFAST. That's credit-risk-focused and what's up now is liquidity and to lesser extent operational." "Britain leaving the European Union creates uncertainty in global financial markets that will certainly push valuations lower," especially for large U.S. banks."However, we would suggest that these banks are much better prepared for economic stress than they have ever been," he wrote in a note to clients. Yet the fears of global contagion are already growing. In the short term, the vote is likely to keep the Federal Reserve Board from raising interest rates as it waits to assess financial stability. "The decision of a majority of U.K. voters to leave the European Union has caught global financial markets completely off guard," . "While still early hours, my Q3 forecast for U.S. GDP is at risk now from the current global financial contagion. Central banks will likely need to factor this shock into their monetary policies, and may need to add emergency liquidity in some places to shore up financial stability."

U.S. banks' stress tests may offer comfort in Brexit tumult | Reuters: The stress tests created for banks by U.S. regulators after the 2008 financial crisis may prove their worth this week, providing a timely message on banks' hardiness in the midst of turbulence over last week's vote by Britain to leave the European Union. The Federal Reserve on Wednesday will release the second set of results from stress tests it has conducted annually on large banks since 2009. The tests look at how strong banks would be in an unforeseen crisis, with economies in freefall, stock markets dropping precipitously and market counterparties at risk of failure. And while the stresses that the Fed is testing for in this case are imagined, analysts say the results should be reassuring to investors worried about banks' exposure to Brexit, an outcome that took the world and markets by surprise. "This is a real-world test that can help demonstrate the greater resiliency of banks' balance sheets and the benefits of de-risking that, while having hurt revenue this decade, should help incrementally in times such as this and show the relative strength of U.S. banks," said CLSA bank analyst Mike Mayo. . In the standardized stress test, the results of which were released last week, the Fed's severely adverse scenario modeled for the stock market losing half its value and unemployment surging to 10 percent, among other factors. The results released on Wednesday will have stressful scenarios tailored to individual banks' business models and will also judge the quality of their planning processes.

Banks Are Spending Billions On Stress Test Preparation --Just days ago we reported that the Federal Reserve trumpeted the fact that all 33 participating banks passed the latest stress test. Banks also spent a lot of money on consultants in preparation for the stress tests as well. After failing the Federal Reserve's annual stress tests in March 2014, the WSJ reports that Citigroup hired multiple consulting firms, and spent about $180 million on stress tests during the second half of 2014 in order to address regulator's concerns. It turns out that banks are spending tens of billions in order to prepare for stress tests, creating quite a lucrative business for consultants. Globally, banks spent about $29 billion on consultants in 2015, much of that expense went for stress tests in the United States and elsewhere according to ALM Intelligence.The $29 billion is a 77% increase from the $16.35 billion that banks spent in 2007, growing significantly each year since the financial crisis. While banks continue todramatically cut costs in other areas of the business, consulting fees is not an area that is taking a hit. The industry has blossomed because if banks fail stress tests, the ability to raise dividends and buy back shares are limited - and how else can that EPS be maintained and lower revenue if shares can't be purchased? Accounting firms and consulting firms have all built specific practices around stress test consulting, and even BlackRock sold forecasting help to about two-thirds of the banks taking the tests. Not surprisingly, there are even consultants offering advice on how to use other stress-test consultants: "Kick out the consultants" Novantas advertised recently, telling banks it can help them cut back. Stress tests require the banks to quantify precisely how much money would be lost under different scenarios, which is a difficult task for some banks with large global footprints. Being that banks generally under invested in the ability to perform such an analysis before the financial crisis, money is now being spent in order to catch up. JPMorgan last year had about 550 people working solely on the Fed Stress tests, with more than 2,000 employees contributing indirectly the WSJ notes. "It's like a whole new department at the bank" said Joe Sullivan, president of International Market Recruiters, who helps banks fill stress-testing jobs.

The Market Just Held a Stress Test: Morgan Stanley, Met Life and Citigroup Flunk - Pam Martens -- Wall Street On Parade has reported on multiple occasions that the Federal Reserve has no idea what it’s doing with its stress testing of the largest banks on Wall Street. Last Friday’s market action, following the Brexit vote in the U.K. to leave the European Union, proved just how feeble the Fed is when it comes to assessing systemic risk and capital vaporization at the deeply interconnected Wall Street mega banks. While the Dow Jones Industrial Average dropped 3.39 percent at the close on Friday, Morgan Stanley lost a stunning 10.15 percent of its market capital in a 6-1/2 hour trading session. At that speed, Morgan Stanley’s equity market capital could be wiped out in 10 trading sessions were this Brexit panic to continue. Citigroup, which became a basket case during the 2008 financial crisis, ending up as a penny stock and requiring the largest bank bailout in the history of financial markets, lost 9.36 percent of its market capital in Friday’s trading session. Bank of America lost 7.41 percent while Goldman Sachs closed down 7.07 percent.As if to underscore that this panic selling is related to the trillions of dollars of derivatives on the books of the banks, Wells Fargo, which has a much smaller exposure to derivatives than the other major Wall Street banks, lost a much milder 4.59 percent on Friday. Another casualty of the Friday selloff was MetLife, the large insurer, which has been fighting in court to have its Fed designation as a global systemically important institution repealed. MetLife is a derivatives counterparty and the fact that it sold off so dramatically on Friday suggests its exposure to Wall Street banks is significant, losing 10.71 percent off its market cap.

JPMorgan staff memo from Jamie Dimon, others about Brexit referendum vote - Jamie Dimon, the chairman and CEO of JPMorgan, just sent a memo, as seen by Business Insider, to all of the investment bank's employees across the world about what the bank plans to do next after Britain shockingly voted Thursday to leave the European Union. Mary Erdoes, the head of Asset Management at JPMorgan, cosigned the memo, as did Daniel Pinto, the head of the Corporate & Investment Bank and of the bank's Europe, Middle East, and Africa division. The note seems to seek calm among employees and insists that negotiations for the British exit from the EU, or Brexit, will take years. Only three weeks ago, Dimon said in a speech that JPMorgan could move an undisclosed number of its 16,000 UK-based workers to Europe if Britain were to vote for a Brexit. While these are not job cuts, it could see roles being moved elsewhere. Here is the note in full:

European Banks Get Crushed, Worst 2-Day Plunge Ever, Italian Banks to Get Taxpayer Bailout, Contagion Hits US Banks - Wolf Street: European bank stocks just experienced their worst two-day plunge ever in the post-Brexit fallout that rained down on the already blooming European banking crisis. Healthy big banks would get over Brexit and the political turmoil it is spawning, particularly non-UK banks. But there are no healthy big banks in Europe. And non-UK banks are crashing just as hard, and some harder. This is about a banking crisis morphing into a financial crisis. These bank stocks got crushed on Friday. And they got crushed again today. Italian banks have been reduced to penny stocks. Spanish banks are getting closer. Commerzbank, Germany’s second largest bank, and still partially owned by the German government as a consequence of the last bailout, is well on the way. The two-day losses are just breathtaking. This table shows the largest banks by country with their percentage losses for today and for the two-day period: Note that the European Stoxx 600 banking index fell 7.6% today for a 21.1% two-day plunge! It isn’t just a few banks whose stocks are collapsing!Deutsche Bank’s infamous CoCo bonds deserve a special word. These hybrid bonds that are just above equity on the capital totem pole had spiraled down, with the 6% CoCos hitting 70 cents on the euro in February. At that point, they and all other Deutsche Bank bonds were propped up by government verbiage and bank money. The bank ingeniously announced it would buy back its own bonds! Like all these transparent market manipulations, the market ate it up, and even the CoCo bonds jumped to 87 cents on the euro. But that didn’t last long. They have since lost 11.5%, including today’s 3.7% plunge to 77 cents on the euro. In Italy, the taxpayer is going to get shanghaied into bailing Banca Monte dei Paschi di Siena out to put a floor under the collapsing share prices and prevent them from going to zero.

As Big Banks Hemorrhage Capital, Glass-Steagall Is Quietly Added to Democratic Platform - Pam Martens - The overall stock market is staging a big rally at the open of trading this morning in New York, but that is not going to calm growing anxieties over how badly systemically risky global banks traded in Friday and Monday’s two days of carnage. Watching tens of billions of equity market capital vaporize at the mega banks in two trading sessions of just 6-1/2 hours each has put renewed attention on separating the insured depository banks that are backstopped by the taxpayer from the high risk investment banks and brokerage firms on Wall Street. That effort has just gained a lot more traction.Quietly, with little media fanfare, restoring the Glass-Steagall Act has been added to the final draft of the Democratic Platform. The passage reads:“The Democratic Platform will make clear that Wall Street cannot be an island unto itself, gambling trillions in risky financial instruments and making huge profits, all the while thinking that taxpayers will be there to bail them out again. The draft calls for defending and expanding Dodd-Frank. The Clinton and Sanders teams brought forward an amendment for an updated and modernized version of Glass-Steagall and breaking up too big to fail financial institutions that pose a systemic risk to the stability of our economy, which the Committee unanimously adopted.” The two overarching questions now are whether the effort to restore the Glass-Steagall Act will come in time to prevent another epic crash of the banks or if there will be soiled, invisible hands working at the upcoming Democratic Platform meeting in Orlando, Florida on July 8-9 to gut the Glass-Steagall amendment from the party platform before the full Platform Committee votes. On July 10 of last year, the Federal Reserve made clear that the largest banks on Wall Street needed to hold more capital. It said in a statement:

Why Is MetLife Tanking in Tandem With Wall Street Banks? By Pam Martens - Nothing would do more to obliterate the legacy of President Obama or the credibility of Federal regulators than for another major U.S. insurer to need a massive taxpayer bailout like AIG did in 2008 because of its exposure to Wall Street mega banks. But the trading action of the giant U.S. insurer, MetLife, following the Brexit vote in the U.K. has tongues wagging on Wall Street. The question is why this company traded worse than even the biggest Wall Street banks in the immediate aftermath of the Brexit vote. In last Friday and Monday’s trading sessions, MetLife lost 17.3 percent of its market capitalization or $8.4 billion. Adding to the curiosity, this comes at a time when MetLife is fighting in court to avoid the government’s designation of it as a non-bank systemically important financial institution or SIFI. Insurers like MetLife are supposed to be the safest of the safe. They hold life insurance policies to protect families in the case of the death of the breadwinner and annuities to provide income to retirees that rely on those policies to buy food and pay bills in retirement. Insurers like MetLife are not supposed to go into a swan dive when a country on the opposite side of the Atlantic holds a voter referendum. The concerns about MetLife should have grabbed the public’s attention when the Financial Stability Oversight Council (F-SOC) released its report on why it was designating MetLife a SIFI on December 18, 2014. The report noted: “MetLife leads the U.S. life insurance industry in certain institutional products and capital markets activities, such as issuances of funding agreement-backed notes (FABNs), guaranteed minimum return products (such as general and separate account GICs), and securities lending activities. These activities expose other market participants to MetLife and create on– and off– balance sheet liabilities that increase the potential for asset liquidations by MetLife in the event of its material financial distress. Efforts to hedge such risks through derivatives and other financial activities are imperfect and further increase MetLife’s complexity and interconnectedness with other financial markets participants…”

Stress Test, Part II: Brexit Raises Stakes for Banks | American Banker: — The U.K.'s surprise vote last week to leave the European Union has upped the ante for the banks taking part in the Federal Reserve Board's second round of stress tests on Wednesday. The one bright spot following last week's abrupt turn of events was the positive scores the banks received on the initial round of Dodd-Frank stress tests. But those are effectively the warm-up round compared to the release this week of the Comprehensive Capital Analysis and Review, which takes into account each bank's capital plan amid a hypothetical severe economic downturn. That theoretical scenario now appears less far-fetched. "Events like Brexit are why the Fed draws up an 'adverse scenario' and a 'severely adverse scenario' for its stress tests," Ian Katz, an analyst Capital Alpha Partners, wrote in a note to clients. To be sure, CCAR's scenarios do not include the effect of the so-called Brexit, and the results of the tests were likely tallied well before the vote. Yet the event will also provide some perspective for the Fed in determining exactly what sort of scenario it should be measuring. "If those factors that are being modeled out are insufficient to capture Brexit, then we need to go back and revisit the stress test itself,"Wayne Abernathy, executive vice president at the American Bankers Association, said the U.K. referendum to leave the EU has not triggered the Fed's extreme scenarios, but so far it is just a "two-day event." "What the stress test is designed to do is more of a longer-term trend than a snap event, and that is appropriate because given the liquidity that banks put in and all the precautions they put in place, they are really well prepared for these surprise events that may happen," Abernathy said. "What is more important is things that last over periods of weeks or months and that is part of the value of the whole stress test — it is forward-looking."

Fed flags Morgan Stanley, Deutsche Bank, Santander, in stress testing: The Federal Reserve objects to capital distribution plans proposed at Deutsche Bank Trust and the Santander U.S. operation, meaning that the banks cannot issue dividends or make share buybacks until they establish a new plan, the central bank said Wednesday. Further, regulators are requiring Morgan Stanley to submit a new capital plan by the end of the fourth quarter of 2016, but said they did not object to the bank's capital plan. The Fed's Wednesday announcement of the results of its Comprehensive Capital Analysis and Review marks the second and final portion of the annual, two-part stress tests aimed at gauging Wall Street's ability to adequately respond to an economic crisis. There were only three objections out of 33 institutions tested. The Fed's objections to Santander Holdings USA and Deutsche Bank Trust, the bank's U.S. transaction bank and wealth management business, mark the second consecutive year regulators flagged both banks. "If a firm were to have a repeat [fail], it would be serious," David Wright, managing director of banking and securities at Deloitte, who previously held various roles within the Fed, said before test results were announced. "Multiple objections are something to be avoided."

"Deutsche Bank Poses The Greatest Risk To The Global Financial System": IMF -- Over three years ago we wrote "At $72.8 Trillion, Presenting The Bank With The Biggest Derivative Exposure In The World" in which we introduced a bank few until then had imagined was the riskiest in the world. As we explained then "the bank with the single largest derivative exposure is not located in the US at all, but in the heart of Europe, and its name, as some may have guessed by now, is Deutsche Bank. The amount in question? €55,605,039,000,000. Which, converted into USD at the current EURUSD exchange rate amounts to $72,842,601,090,000.." So here we are three years later, when not only did Deutsche Bank just flunk the Fed's stress test for the second year in a row, but moments ago in a far more damning analysis, none other than the IMF disclosed that Deutsche Bank poses the greatest systemic risk to the global financial system, explicitly stating that the German bank "appears to be the most important net contributor to systemic risks." Here is the key section in the report: Domestically, the largest German banks and insurance companies are highly interconnected. The highest degree of interconnectedness can be found between Allianz, Munich Re, Hannover Re, Deutsche Bank, Commerzbank and Aareal bank, with Allianz being the largest contributor to systemic risks among the publicly-traded German financials. Both Deutsche Bank and Commerzbank are the source of outward spillovers to most other publicly-listed banks and insurers. Given the likelihood of distress spillovers between banks and life insurers, close monitoring and continued systemic risk analysis by authorities is warranted. Among the G-SIBs, Deutsche Bank appears to be the most important net contributor to systemic risks, followed by HSBC and Credit Suisse. In turn, Commerzbank, while an important player in Germany, does not appear to be a contributor to systemic risks globally. In general, Commerzbank tends to be the recipient of inward spillover from U.S. and European G-SIBs. The relative importance of Deutsche Bank underscores the importance of risk management, intense supervision of G-SIBs and the close monitoring of their cross-border exposures, as well as rapidly completing capacity to implement the new resolution regime.

Why Two of Europe's Biggest Banks Can't Pass the Stress Test | American Banker: The vast majority of big banks seem to be getting a handle on the costly, labor-intensive and time-consuming stress-testing process. Twenty-nine institutions have cleared the bar in each of the last two years. For a pair of large banking companies, however, Santander Holdings USA and Deutsche Bank Trust Corp., the stress tests have so far proven to be an unconquerable challenge. The Federal Reserve Board announced Wednesday that the two were alone in failing this year's Comprehensive Capital Analysis and Review. The results marked the second consecutive failed stress test for the unit of Germany-based Deutsche Bank, and the third straight year that Santander's U.S. arm has flunked. Both companies met the minimum regulatory capital ratios that are required by the Fed, but they fell short on qualitative grounds, just as they did in 2015. The Deutsche and Santander units were both called out for what the Fed identified as deficiencies in risk-management processes and stress-testing processes, though the Fed also said that both firms have made progress. Both of the struggling banks are foreign-owned, but observers were split on whether that factor is contributing to their poor results. Oliver Ireland, a partner at Morrison & Foerster, said that they may be the result of different priorities at the parent company level. "The U.S. regulators may have the full attention of the U.S. management, but they may not have the same attention of the foreign management," he said.

World's Most Systemically Dangerous Bank Crashes Back To Record Lows --Despite all the exuberance over the Brexit bounce in US (and UK) equities, never minds bonds, FX, and credit being far less enthusiastic, Deutsche Bank is plunging once again this morning. Having failed The Fed's stress test for the second year running and been diagnosed by The IMF as the world's most systemically dangerous financial entity, the giant Germanbank is getting slammed down almost 4% today, back near record lows as its 'Lehman-esque' path to devastation continues. This is far from over!! And if DB goes... Then who's next? As we previously conclude, considering two of the three most "globally systemically important", i.e., riskiest, banks just saw their stock price scrape all time lows earlier this week, we wonder just how nervous behind their calm facades are the executives at the ECB, the IMF, and the rest of the handful of people who realize just close to the edge of collapse this world's mostriskiest bank (whose market cap is less than the valuation of AirBnB) finds itself right now.

What’s German for schadenfreude? - The Times - Here’s a cheery thought: some things are even worse in Germany. Not the football team, of course. Or the sausages. No, something much more trivial: its banks. Or at least one of them: Deutsche Bank. It’s just been voted the world’s riskiest financial institution by the International Monetary Fund — and rather pointedly, too. The bank, it says, “appears to be the most important net contributor to systemic risks, followed by HSBC and Credit Suisse”. The markets have been telling us the same thing too. On Thursday, Deutsche Bank shares hit a 30-year low, even if they recovered slightly yesterday.…

GE Capital No Longer a Systemic Threat: FSOC | American Banker: – The Financial Stability Oversight Council announced Wednesday it was rescinding the systemic designation of GE Capital, the first time the interagency body has de-designated a firm. While the move has been expected given GE Capital's decision to sell its financial assets, it is proof that a SIFI designation is not permanent. "Today's decision clearly demonstrates that the Council's designation of nonbank financial companies is a two-way process," said Treasury Secretary Jacob Lew. "The council will remove a designation when that company no longer poses risks to U.S. financial stability." With around $500 billion in assets, GE Capital was the nation's seventh-largest bank holding company when it decided last year to start selling most of its financial assets and spin off its consumer finance unit, Synchrony, as a separate business. "GE Capital has made fundamental strategic changes that have resulted in a company that is significantly smaller and safer, with more stable funding," Lew said. "After a rigorous review and engagement with the company over the last year, the Council determined that based on these changes, the designation is no longer warranted."

State Associations Support Durbin Repeal Legislation | ABA Banking Journal: The state bankers associations today wrote to Rep. Randy Neugebauer (R-Texas) to express their support for a bill he introduced earlier this month that would repeal Dodd-Frank’s Durbin Amendment and eliminate the government-imposed price caps on debit card interchange. The groups pointed out that the amendment has reduced banks’ ability to offer affordable products and services to their customers, while failing to pass on any tangible savings to consumers, as originally intended. “[T]he amendment has only rewarded big-box stores with higher profits, while resulting in higher costs to smaller merchants, fewer resources available for banks — including community banks — to serve their communities, and a reduction in low-cost banking services for those most in need,” the associations wrote. “[R]etailers cannot produce evidence that they have returned the proceeds of the Durbin Amendment to consumers in the form of lower prices. Fewer services and higher costs for consumers is not an acceptable policy outcome for a law that promised tangible benefits for American debit card customers.”

Lenders Rejected by Supreme Court on State Interest Caps -- Rejecting calls from across the financial-services industry, the U.S. Supreme Court let stand a ruling that gives borrowers more power to enforce state limits on interest rates. The justices turned away a company’s effort to avoid a class-action lawsuit over efforts to collect credit-card debt from New York consumers. The rebuff leaves intact a federal appeals court ruling that lenders say is already having far-reaching effects by undercutting the burgeoning internet lending business and raising questions about debt-backed securities that contain high-interest loans. The appeals court decision is a blow to LendingClub Corp., Prosper Marketplace Inc. and other companies that arrange consumer loans online. It may prevent those marketplace lenders from bypassing usury laws by originating loans in states without rate caps. The ruling was largely expected and doesn’t indicate the end of debate around the issues raised in the case, according to Issac Boltansky, an analyst at Compass Point Research & Trading. The industry is likely to continue fighting in the courts to clarify how some loans are treated after they are sold, he said. The court’s decision also raises uncertainty as U.S. regulators consider new rules to address the explosive growth of an industry that is threatening to upend traditional lending models. The Securities and Exchange Commission, Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau are among agencies studying the online lending industry, including around whether companies should retain a stake the loans they make.

Community Banks, Credit Unions Join Forces Against CFPB's Payday Plan - — Community banks and credit unions would be forced to stop making short-term, small dollar loans if the Consumer Financial Protection Bureau's payday lending proposal is adopted, two trade groups said Monday. The Independent Community Bankers of America and the Credit Union National Association sent a joint two-page letter to CFPB Director Richard Cordray, explaining why they think the payday plan is unworkable for their constituents. "The proposed rule, if finalized in its current form, would unquestionably disrupt lending by credit unions and community banks," said the letter, signed by Cam Fine, the president of ICBA, and Jim Nussle, the president of CUNA. CUNA also sent a separate seven-page letter to Rick Metsger, chairman of the National Credit Union Administration, asking that credit unions be exempt from the CFPB's proposal. "It is important to understand that credit unions, who make little or no profit on PAL or other similar loans but usually offer them as a service or courtesy to members, are being asked to voluntarily navigate compliance with a rule that is hundreds of pages long with many complexities," wrote CUNA in its separate letter. While it is rare to have credit unions and banks line up on the same side of an issue, both ICBA and CUNA want to ensure that small institutions are allowed to originate small loans to consumers who generally have nowhere else to go, but payday lenders or loan sharks. If small banks and credit unions stop making small dollar loans, millions of people could be forced to get loans from of the very firms the CFPB is trying to target, the trade groups claim.

CFPB Staff Inappropriately Reimbursed for Personal Expenses: Watchdog - The Consumer Financial Protection Bureau has difficulties supervising its government travel card program and has reimbursed some employees for lodging and meals while not on official travel, a watchdog said Thursday. A report by the CFPB's inspector general found that some employees used their travel cards for personal use, while others were reimbursed for expenses incurred while on personal leave during official travel. Still, the amounts claimed and reimbursed were small and limited to a handful of employees. The inspector general found 16 employees who were reimbursed a total of $4,530 while not on official travel. Another seven employees were reimbursed $3,798 for lodging and meals while on personal leave during official travel. The inspector general also said the CFPB could not "provide reasonable assurance" that government travel cards were closed when employees left the agency. There were 92 employees who left the bureau during the scope of the audit, but it took 22 days on average to close travel accounts. In one instance, it took 79 days. The bureau had 1,208 employees who spent $16.7 million in transactions and fees using the used the government travel card program last year. Overall, the report found that the CFPB's travel program lacks controls to prevent unauthorized usage and that its policies are outdated and do not explicitly define personal use. The travel office also does not have an efficient process to identify improper purchases, the report found. "The CFPB faces an increased risk that its employees will misuse their [government travel cards] and that the misuse will not be identified by approving officials," the report stated.

CFBP Recoups $24.5M For Consumers - The Consumer Financial Protection Bureau said Thursday (June 30) that it has, through the first four months of 2016, recovered $24.5 million for consumers harmed by illegal auto finance and other types of loans. The restitution, said the agency in a press release detailing the actions, was paid out to more than 257,000 consumers. The products under scrutiny run the gamut from auto loans to mortgages to small dollar lending. The latest recovery efforts and fulfillment came as part of the 12th edition of Supervisory Highlights. Key findings include deceptive practices in auto loans. In other cases there had been erroneous manual inputs of data, chiefly through amounts financed. Business practices also could use improvement, as the CFPB stated that consumers were misled about debt repayment processes. The coding of certain data incorrectly, in fact, stymied debt collection efforts. In other cases, some collectors were able to illegally steer consumers to affiliate companies for tax and other services. The violations that were uncovered by the agency, according to the release, were due at least in part to poor staff training and the fact that less than stellar in-house collection efforts led to poor results.

Privately Insured CUs Reap FHLB Benefits - When credit unions were given access to the Federal Home Loan Bank system in 1989, only federally insured credit unions were specifically mentioned in the enabling legislation, leaving out the relatively small handful of privately insured state charters. "It was an oversight by Congress," according to Dennis Adams, president and CEO of American Share Insurance, the Dublin, Ohio-based provider of private insurance. It's an oversight that's easy to make, as privately insured credit unions (PICUs) make up just 2% of the total credit union industry and 15% of the state-chartered CUs in the nine states that allow for private insurance. Currently, PICUs constitute 1.2 million members and more than $15 billion in assets. Looking at the numbers, it might appear to be a minor oversight and one that would be easy to resolve, but it would be 26 years before that finally happened. This past December, PICUs were given the ability to join the FHLB, an alternative source of liquidity and housing finance that can contribute to a CU's product offerings. "It really took away a discriminatory feature," Adams said. The change, inserted at the request of Financial Services Chairman Rep. Jeb Hensarling (R-Texas) and Sen. Joe Donnelly (D-Ind.), was included as rider legislation amongst many other additional provisions to a nearly 500-page, $325 billion piece of transportation legislation.

Big Banks Have Nearly Abandoned the FHA Market: Big banks have drastically reduced their share of the Federal Housing Administration market, a massive shift that has big implications, according to new analysis by the American Enterprise Institute. Large banks — which had a 60% share of FHA refinancings in late 2013 — had a 6% share as of May 31, according to Stephen Oliner, a resident scholar at AEI. Nonbank lenders currently originate 90% of FHA-insured refinancings, according to new data released by the group. Large banks also had a 65% share of the FHA purchase market in 2012, which is now down to 20%, according to AEI. "The shift away from large banks to nonbanks has been truly massive," Oliner said. The recent drop in interest rates is expected to spur another surge in refinancings due to Britain's unexpected decision to leave the European Union. But the large banks have decided that refinancing FHA loans is "not a good business" due to the regulatory environment and litigation risk, Oliner said. "They are getting out," he said, noting that many FHA lenders have been sued under the False Claims Act and had to pay huge fines to the Justice Department. Banks also don’t get Community Reinvestment Act credit for refinancings. "So this is pretty much a lose-lose business for them," Oliner said.

HUD Mandates New Requirements on Nonperforming Loan Buyers: Buyers of nonperforming Federal Housing Administration loans will have to evaluate borrowers for principal reductions and abide by new restrictions issued by the Department of Housing and Development on Thursday. "Certain families with distressed mortgages insured by FHA may soon be eligible for a reduction of their outstanding loan amounts should their mortgages be sold through the Distressed Asset Stabilization Program," HUD said in a press release. HUD announced over 10 enhancements to the program that have been advocated by consumer groups and members of Congress. Besides principal forgiveness, FHA is prohibiting nonperforming loan buyers and investors from "walking away" and abandoning vacant properties. "This prohibition will stem the proliferation of blighted properties that limit recovery in struggling communities, and it also appropriately aligns FHA requirements applicable to servicers of these loans both before and after sale," said Rob Grossinger, president and chief executive of the National Community Stabilization Trust. FHA also announced that it will be releasing performance and outcome data for each pool of nonperforming loans acquired by investors.

Regulators Fine BancorpSouth $10.6 Million for Redlining- Department of Justice and the Consumer Financial Protection Bureau fined Mississippi-based BancorpSouth $10.6 million, alleging the bank deliberately discriminated against minorities in its lending practices. BancorpSouth, a medium-sized regional bank with $13.9 billion in assets and 239 branches in eight states, deliberately avoided building branches in minority neighborhoods in Memphis, Tennessee from at least 2011 to 2013. The bank also denied more loans to African Americans and other minorities when compared to neighborhoods with smaller minority populations, the Justice Department and CFPB said Wednesday, and minorities who were approved for loans were given higher interest rates when compared to non-minorities. While BancorpSouth is based in Tupelo, Mississippi, the case deals with BancorpSouth's presence in Memphis and stems from a 2014 investigation into BancorpSouth by the Justice Department and CFPB. The bank had 22 branches in the Memphis area between 2011 and 2013, all of which were located outside neighborhoods with large minority populations. Maps provided by the regulators also showed nearly all BancorpSouth's loans originated outside minority neighborhoods of Memphis as well. "BancorpSouth's discrimination throughout the mortgage lending process harmed the people who were overcharged or denied their dream of home ownership based on their race, and it harmed the Memphis minority neighborhoods that were redlined and denied equal access to affordable credit," said CFPB Director Richard Cordray in prepared remarks. BancorpSouth during this period required its employees to treat applications based upon a potential borrower's race, color and national origin, according to the complaint filed in the case. Minority applicants were to be denied loans more quickly than white applicants, and minority applicants who were considered borderline for approval were denied based on race.

Clash Brewing over Robo-Calls from Mortgage Servicers: In the aftermath of the foreclosure crisis, the federal government wants mortgage companies to be proactive in reaching out to delinquent borrowers. At the same time, the Obama administration is also trying to protect U.S. consumers from unwanted calls to their cellphones. Now those two goals are coming into conflict. In a largely overlooked regulatory filing, the Federal Housing Finance Agency recently asked the Federal Communications Commission to carve out an exemption for the mortgage industry from strict rules on robo-calls. The FCC prohibits auto-dialed calls to mobile phones except in cases where the call's recipient has given permission. But the FHFA says that those rules hamper the ability of mortgage servicers to assist homeowners who have fallen behind on their monthly payments. "Avoiding foreclosure requires mortgage servicers to work directly with individual loan borrowers, typically through telephone contact," FHFA General Counsel Alfred Pollard wrote in a June 6 letter to the FCC. "The efficient and early resolution of a delinquency to avoid foreclosure is the key to ensuring a borrower does not lose his or her home." The FHFA is seeking an exemption that would apply to residential mortgage servicers that are calling delinquent borrowers. It would cover not only the servicers of Fannie Mae and Freddie Mac-backed loans — the FHFA oversees the two government-sponsored mortgage giants — but other mortgage servicers as well. The idea is being panned by a coalition of consumer advocacy groups; they say it would give a free pass to mortgage servicers that have a record of consumer-protection violations and would create a huge loophole in the federal law that shields Americans from unwanted phone calls.

Freddie Mac: Mortgage Serious Delinquency rates declined in May -- Freddie Mac reported that the Single-Family serious delinquency rate decreased in May to 1.11% from 1.15% in April. Freddie's rate is down from 1.58% in May 2015. This is the lowest rate since August 2008. Freddie's serious delinquency rate peaked in February 2010 at 4.20%. These are mortgage loans that are "three monthly payments or more past due or in foreclosure". Although the rate is generally declining, the "normal" serious delinquency rate is under 1%. The Freddie Mac serious delinquency rate has fallen 0.47 percentage points over the last year, and at that rate of improvement, the serious delinquency rate will be below 1% in a few months.

Fannie Mae: Mortgage Serious Delinquency rate declined in May -- Fannie Mae reported today that the Single-Family Serious Delinquency rate declined in May to 1.38%, down from 1.40% in April. The serious delinquency rate is down from 1.70% in May 2015. These are mortgage loans that are "three monthly payments or more past due or in foreclosure". This is the lowest rate since June 2008. The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%. Although the rate is generally declining, the "normal" serious delinquency rate is under 1%. The Fannie Mae serious delinquency rate has fallen 0.32 percentage points over the last year, and at that rate of improvement, the serious delinquency rate will not be below 1% until the second half of 2017.

New Chinese Owner Of Waldorf Astoria Will Convert It Into Condos - In October of 2014, Chinese insurance company Anbang purchased the historic Waldorf Astoria hotel in Manhattan for $1.95 billion. This M&A activity, as we have noted many times, was part of an effort to bypass Chinese capital controls and park cash in America. Today, courtesy of the WSJ, we learn what Anbang's plan is for the hotel. The insurance group plans to close down the 1,413 room property in the spring and renovate it so that when it reopens, the hotel will feature between 300 and 500 guest rooms upgraded to luxury standards, with the remaining units to be sold as condominiums. Anbang hasn't shared much publicly about its plans for the Waldorf, however as the WSJnotes, Anbang Chairman Xiaohui Wu hinted at the company's vision last year when speaking before an audience at Harvard University. Xiaohui said he planned to convert hotel rooms into condos and suggested that there would be an element of exclusivity by saying "A potential buyer needs more than money to qualify for our apartments." The renovation costs are expected to be more than $1 billion, and being that Anbang already spent $1.95 billion on the acquisition, $3 billion in sales would be needed to break even on the venture - although admittedly, this perhaps was never really about turning a profit as much as it was to get USD in bank accounts in the US. Anbang will have a difficult time covering that $3 billion in today's market. In 2014 Morgan Stanley hotel analyst Thomas Allen wrote that based on sales at other luxury Manhattan condo buildings, a conversion of the historic hotel could help raise $4 billion in condo sales under a best-case scenario. However, as readers of this site know full well, the best case scenario has long passed when it comes to luxury real estate in Manhattan. The number of contracts signed for units at $4 million or more during the first 25 weeks of this year fell 22% y/y according to Olshan Realty, who said "There's just too much inventory that's overpriced. We're past the peak."

Obama Recruits Goldman, Google, Others to Resettle Refugees - At least 15 U.S. companies led by Goldman Sachs Group Inc. and Alphabet Inc. have pledged money to help the Obama administration resettle refugees fleeing the Syrian civil war and other international conflicts. The White House is leaning on companies to commit money and other assistance to resettlement programs ahead of a Sept. 20 summit President Barack Obama will host at the United Nations. Other companies participating in the effort include MasterCard Inc., United Parcel Service Inc., HP Inc., and IBM, according to a document obtained by Bloomberg News. Obama has said the U.S. will admit 10,000 Syrian refugees by the end of September, a pledge that’s become a flashpoint in the 2016 presidential campaign. Presumptive Republican nominee Donald Trump has said the refugees present a threat to U.S. security and should not be allowed entry. Presumptive Democratic nominee Hillary Clinton has said she would admit even more, if she is elected. The government says it only considers resettling the most vulnerable refugees, such as widows, orphaned children, and people whose lives have been threatened by Syrian President Bashar al-Assad’s regime. Refugees go through an extensive screening process that has significantly slowed their entry to the U.S., with only 5,000 approved for resettlement so far, Homeland Security Secretary Jeh Johnson told Congress on Thursday. Obama has denounced Trump’s position, without using the candidate’s name. “When refugees escape barrel bombs and torture, and migrants cross deserts and seas seeking a better life, we cannot simply look the other way,” the president said Wednesday in a speech to the Canadian Parliament in Ottawa. “We certainly can’t label as possible terrorists vulnerable people who are fleeing terrorists.”

MBA: "Mortgage Applications Decrease in Latest Weekly Survey" -- From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey Mortgage applications decreased 2.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 24, 2016. ...The Refinance Index decreased 2 percent from the previous week. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index decreased 4 percent compared with the previous week and was 13 percent higher than the same week one year ago. ...The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) to its lowest level since May 2013, 3.75 percent, from 3.76 percent, with points increasing to 0.36 from 0.33 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The first graph shows the refinance index since 1990. Refinance activity has increased a little this year since rates have declined. 30-year fixed rates would probably have to fall below 3.35% (the previous low - getting close) before there is a large increase in refinance activity. The second graph shows the MBA mortgage purchase index. The purchase index is "13 percent higher than the same week one year ago".

"6-Day Winning Streak Leaves Mortgage Rates Near All-Time Lows" --From Matthew Graham at Mortgage News Daily: 6-Day Winning Streak Leaves Rates Near All-Time Lows Mortgage rates fell moderately today, adding a 6th day to a winning streak that began with last week's Brexit news and bringing rates right to the brink of all-time lows.... bringing some lenders from 3.625% to 3.375%, which is now the most prevalently-quoted conventional 30yr fixed rate on top tier scenarios. Why is 3.375% important? Simply put, the next time rates move a notch lower, they'll be back to official all-time lows. In fact, 3.375% is the lowest rate that markets were able to maintain for more than a day or two back in 2012. Here is a table from Mortgage News Daily: Home Loan Rates. View More Refinance Rates.

• U.S. home prices were up 1.0 percent for the month, and have gained 5.4 percent from one year ago
• At $260K, the U.S. HPI is up over 30 percent from the market’s bottom and is now just 2.9 percent off its June 2006 peak
• 14 of the nation's 40 largest metropolitan areas hit new peaks in April:
◦Austin, TX ($299K)
◦Boston, MA ($419K)
◦Charlotte, NC ($207K)
◦Dallas, TX ($230K)
◦Denver, CO ($351K)
◦Houston, TX ($225K)
◦Kansas City, MO ($180K)
◦Nashville, TN ($231K)
◦Pittsburgh, PA ($190K)
◦Portland, OR ($346K)
◦San Antonio, TX ($200K)
◦San Francisco, CA ($765K)
◦San Jose, CA ($921K)
◦Seattle, WA ($401K)

The year-over-year increase in the index has been about the same for the last year.

Case-Shiller: National House Price Index increased 5.0% year-over-year in April -- S&P/Case-Shiller released the monthly Home Price Indices for April ("April" is a 3 month average of February, March and April prices).n This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index. From S&P: Home Prices Continue Gains in April According to the S&P/Case-Shiller Home Price Indices. The S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, reported a 5.0% annual gain in April, down from 5.1% the previous month. The 10-City Composite posted a 4.7% annual increase, down from 4.8% in March. The 20-City Composite reported a yearover-year gain of 5.4%, down from 5.5% from the prior month. ... Before seasonal adjustment, the National Index posted a month-over-month gain of 1.0% in April. The 10-City Composite recorded a 1.0% month-over-month increase, while the 20-City Composite posted a 1.1% increase in April. After seasonal adjustment, the National Index recorded a 0.1% month-overmonth increase, the 10-City Composite posted a 0.3% increase, and the 20-City Composite reported a 0.5% month-over-month increase. After seasonal adjustment, 15 cities saw prices rise, two cities were unchanged, and three cities experienced negative monthly prices changes. The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000). The Composite 10 index is off 10.6% from the peak, and up 0.3% in April (SA). The Composite 20 index is off 9.0% from the peak, and up 0.5% (SA) in April. The National index is off 3.0% from the peak, and up 0.1% (SA) in April. The National index is up 31.0% from the post-bubble low set in December 2011 (SA). The second graph shows the Year over year change in all three indices. The Composite 10 SA is up 4.7% compared to April 2015. The Composite 20 SA is up 5.4% year-over-year.. The National index SA is up 5.0% year-over-year. Note: According to the data, prices increased in 16 of 20 cities month-over-month seasonally adjusted.

20 city unadjusted home price rate of growth accelerated 0.1 % month-over-month. [Econintersect uses the change in year-over-year growth from month-to-month to calculate the change in rate of growth]

Note that Case-Shiller index is an average of the last three months of data.

Case Shiller's David M. Blitzer, Chairman of the Index Committee at S&P Indices: The housing sector continues to turn in a strong price performance with the S&P/Case-Shiller National Index rising at a 5% or greater annual rate for six consecutive months. The home price increases reflect the low unemployment rate, low mortgage interest rates, and consumers' generally positive outlook. One result is that an increasing number of cities have surpassed the high prices seen before the Great Recession. Currently, seven cities - Denver, Dallas, Portland OR, San Francisco, Seattle, Charlotte, and Boston - are setting new highs However, the outlook is not without a lot of uncertainty and some risk. Last week's vote by Great Britain to leave the European Union is the most recent political concern while the U.S. elections in the fall raise uncertainty and will distract home buyers and investors in the coming months. The details in the S&P/Case-Shiller Home Price data also hint at possible softness. Seasonally adjusted figures in the report show that three cities saw lower prices in April compared to only one city in March. Among the 20 cities, 16 saw either declines or smaller increases in monthly prices in the seasonally adjusted numbers.

Real Prices and Price-to-Rent Ratio in April - Here is the earlier post on Case-Shiller: Case-Shiller: National House Price Index increased 5.0% year-over-year in April The year-over-year increase in prices is mostly moving sideways now around 5%. In April, the index was up 5.0% YoY. In the earlier post, I graphed nominal house prices, but it is also important to look at prices in real terms (inflation adjusted). Case-Shiller, CoreLogic and others report nominal house prices. As an example, if a house price was $200,000 in January 2000, the price would be close to $274,000 today adjusted for inflation (37%). That is why the second graph below is important - this shows "real" prices (adjusted for inflation). It has been almost ten years since the bubble peak. In the Case-Shiller release this morning, the National Index was reported as being 3.0% below the bubble peak. However, in real terms, the National index is still about 17.1% below the bubble peak. The first graph shows the monthly Case-Shiller National Index SA, the monthly Case-Shiller Composite 20 SA, and the CoreLogic House Price Indexes (through April) in nominal terms as reported. In nominal terms, the Case-Shiller National index (SA) is back to November 2005 levels, and the Case-Shiller Composite 20 Index (SA) is back to June 2005 levels, and the CoreLogic index (NSA) is back to June 2005. Real House Prices The second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices. In real terms, the National index is back to January 2004 levels, the Composite 20 index is back to November 2003, and the CoreLogic index back to November 2003. In real terms, house prices are back to late 2003 levels. This graph shows the price to rent ratio (January 1998 = 1.0). On a price-to-rent basis, the Case-Shiller National index is back to August 2003 levels, the Composite 20 index is back to June 2003 levels, and the CoreLogic index is back to April 2003.

Zillow Forecast: Expect About the Same Growth in May for the Case-Shiller Indexes - The Case-Shiller house price indexes for April were released yesterday. Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close. From Zillow: May Case-Shiller Forecast: April's Modest Monthly Slowdown Should Continue April Case-Shiller data showed seasonally adjusted monthly home price growth that was slightly weaker than expected, and annual growth at a pace in line with recent months. Looking ahead, Zillow’s May Case-Shiller forecast calls for more of the same, with seasonally adjusted monthly growth in the 10- and 20-city indices falling slightly from April while annual growth stays largely flat. The May Case-Shiller National Index is expected to grow 5 percent year-over-year and 0.1 percent month-to-month, both unchanged from April. We expect the 10-City Index to grow 4.7 percent year-over-year and 0.1 percent from April. The 20-City Index is expected to grow 5.3 percent between May 2015 and May 2016 and 0.1 percent from April. Zillow’s May Case-Shiller forecast is shown in the table below. These forecasts are based on today’s April Case-Shiller data release and the May 2016 Zillow Home Value Index (ZHVI). The May Case-Shiller Composite Home Price Indices will not be officially released until Tuesday, July 26. The year-over-year change for the 20-city index will probably be slightly lower in the May report than in the April report. The change for the National index will probably be about the same.

CoStar: Commercial Real Estate prices increased in May -- Here is a price index for commercial real estate that I follow. From CoStar: Composite Price Indices Resume Solid Growth Boosted By Strong Net Absorption . Both of CCRSI’s two major composite price indices advanced by more than 1% in the month of May 2016, erasing earlier-year declines. After the two major indices backtracked in the first quarter of 2016 amid global economic uncertainty and a seasonal slowdown in investment activity, price growth within the commercial real estate sector during May 2016 returned to the average monthly pace set in the previous several years. The equal-weighted U.S. Composite Index rose 1.1% and the value-weighted U.S. Composite Index advanced 1.2% in May 2016, placing the value-weighted index at its highest level this cycle. . Demonstrating the overall demand for CRE space, net absorption across the three major property types—office, retail and industrial—is projected to total 688.5 million square feet for the 12-month period ending in June 2016, a 9.5% increase from the same period ending in June 2015. ... This graph from CoStar shows the the value-weighted U.S. Composite Index and the equal-weighted U.S. Composite Index indexes. The value-weighted index increased 1.2% in May and is up 2.2% year-over-year. The equal-weighted index increased 1.1% in May and is up 6.7% year-over-year. Note: These are repeat sales indexes - like Case-Shiller for residential - but this is based on far fewer pairs.

NAR: Pending Home Sales Index decreased 3.7% in May, down 0.2% year-over-year - From the NAR: Pending Home Sales Skid in May After steadily increasing for three straight months, pending home sales letup in May and declined year-over-year for the first time in almost two years, according to the National Association of Realtors®. All four major regions experienced a cutback in contract activity last month. The Pending Home Sales Index, a forward-looking indicator based on contract signings, slid 3.7 percent to 110.8 in May from a downwardly revised 115.0 in April and is now slightly lower (0.2 percent) than May 2015 (111.0). With last month’s decline, the index reading is still the third highest in the past year, but declined year-over-year for the first time since August 2014....The PHSI in the Northeast dropped 5.3 percent to 93.0 in May, and is now unchanged from a year ago. In the Midwest the index slipped 4.2 percent to 108.0 in May, and is now 1.8 percent below May 2015. Pending home sales in the South declined 3.1 percent to an index of 126.6 in May but are still 0.6 percent higher than last May. The index in the West decreased 3.4 percent in May to 102.6, and is now 0.1 percent below a year ago.. This was below expectations of a 1.0% decrease for this index. Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in June and July.

Pending Home Sales Crash Most In 6 Years - 'Supply' Blamed -- Following April's exuberant 6 year high bounce (revised lower from +5.1% to +3.9%), May saw pending home sales plunge 3.7% - the biggest drop since May 2010. Sales declined in all 4 regions (with a 4.2% plunge in Midwest to January lows). This is the first annual drop in home sales in 2 years (-0.2%) and realtors are blaming 'supply' on the slump... sure (and all that pent up demand). Remember April... Well May gave it all back and was revised drastically lower... Lawrence Yun, NAR chief economist, says pending sales slumped in May across most of the country. “With demand holding firm this spring and homes selling even faster than a year ago, the notable increase in closings in recent months took a dent out of what was available for sale in May and ultimately dragged down contract activity,” he said. “Realtors® are acknowledging with increasing frequency lately that buyers continue to be frustrated by the tense competition and lack of affordable homes for sale in their market.” Despite mortgage rates hovering around three-year lows for most of the year, Yun says scant supply and swiftly rising home prices – which surpassed their all-time high last month – are creating an availability and affordability crunch that’s preventing what should be a more robust pace of sales. “Total housing inventory at the end of each month has remarkably decreased year-over-year now for an entire year,” adds Yun. “There are simply not enough homes coming onto the market to catch up with demand and to keep prices more in line with inflation and wage growth.”

May 2016 Pending Home Sales Index Declines: The National Association of Realtors (NAR) seasonally adjusted pending home sales index declined. Our analysis of pending home sales is more positive than the NAR's, but we are forecasting relatively poor June home sales. The quote of the day from this NAR release: ... the notable increase in closings in recent months took a dent out of what was available for sale in May and ultimately dragged down contract activity ... Pending home sales are based on contract signings, and existing home sales are based on the execution of the contract (contract closing). The NAR reported:

Pending home sales index was down 3.7 % month-over-month and down 0.2 % year-over-year.

the index growth rate was up 0.6 % month-over-month and up 2.4 % year-over-year.

The current trends (using 3 month rolling averages) are improving and remains in expansion.

Extrapolating the pending home sales unadjusted data to project June 2016 existing home sales, this would be a 3.3 % contraction year-over-year for existing home sales.

Construction Spending July 1, 2016: Highlights Construction spending proved surprisingly weak in May, down 0.8 percent vs expectations for a 0.6 percent gain. The decline follows an even steeper and downwardly revised 2.0 percent drop in April. Spending on single-family homes, despite the rise underway in housing starts, fell 1.3 percent in May for a third straight decline with the year-on-year gain moving slightly lower to a still constructive 6.3 percent. Spending on multi-family homes has been much stronger, up 1.8 percent in the month for a 23.9 percent year-on-year gain. Construction spending on non-housing has been very soft with May down 0.7 percent following April's 0.1 percent dip. Year-on-year, private nonresidential spending is up 3.9 percent led by the office category and pulled down by manufacturing. Public spending on buildings and highways has been flat to slightly negative. Housing is on the climb this year but a gradual one, which has its positives given the bubbles of the past. The construction sector as a whole still looks to be a positive contributor to overall economic growth.

Construction Spending decreased 0.8% in May - Earlier today, the Census Bureau reported that overall construction spending decreased 0.8% in May compared to April:The U.S. Census Bureau of the Department of Commerce announced today that construction spending during May 2016 was estimated at a seasonally adjusted annual rate of $1,143.3 billion, 0.8 percent below the revised April estimate of $1,152.4 billion. The May figure is 2.8 percent above the May 2015 estimate of $1,112.2 billion. Private and public spending decreased in May: Spending on private construction was at a seasonally adjusted annual rate of $859.3 billion, 0.3 percent below the revised April estimate of $861.9 billion. ...In May, the estimated seasonally adjusted annual rate of public construction spending was $284.0 billion, 2.3 percent below the revised April estimate of $290.5 billion.This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted. Private residential spending has been generally increasing, but is 33% below the bubble peak. Non-residential spending is only 2% below the peak in January 2008 (nominal dollars). Public construction spending is now 13% below the peak in March 2009. The second graph shows the year-over-year change in construction spending. On a year-over-year basis, private residential construction spending is up 5%. Non-residential spending is up 4% year-over-year. Public spending is down 3% year-over-year. Looking forward, all categories of construction spending should increase in 2016. Residential spending is still fairly low, non-residential is increasing (except oil and gas), and public spending is also generally increasing after several years of austerity. This was well below the consensus forecast of a 0.6% increase for May, however construction spending for the previous two years were revised up.

3 month rolling average is 6.6 % above the rolling average one year ago, and decelerated 2.9 % month-over-month. As the data is noisy (and has so much backward revision) - the moving averages likely are the best way to view construction spending.

Personal Income and Outlays June 29, 2016: Personal income as well as personal spending slowed in May at the same time that price data remained quiet. Income rose at the low end of expectations, up only 0.2 percent, while spending showed a little life, up 0.4 percent. The PCE core price index rose only 0.2 percent with the year-on-year rate unchanged and still below the Fed's 2 percent target at 1.6 percent. Overall prices also rose 0.2 percent with the year-on-year rate dipping 2 tenths to only plus 0.9 percent. Details on income show only a 0.2 percent rise in wages & salaries, down from April's outsized 0.5 percent gain. With income growth stalling, consumers may have tapped into their savings slightly to fund May's spending as the savings rate edged 1 tenth lower to 5.3 percent for the lowest rate of the year. Details on spending show gains concentrated in nondurable goods where price effects for gasoline and energy are inflating the totals. Spending on durable goods, despite a solid rise in vehicle sales during May, rose a soft 0.3 percent. Service spending was respectable with a 0.4 percent gain. The spending side of May's report isn't robust though it was robust in April, revised in fact 1 tenth higher to a recovery best 1.1 percent. When adjusted for inflation, the two months combined show an annualized growth rate of about 4 percent which, with June's results still pending, will support a jump in second quarter GDP. But based on trends including May's results, April may very well prove to be an outlier for spending. April aside, today's report is consistent with moderate economic growth and does not point, especially with the uncertainty of Brexit in play, to a Fed rate hike anytime soon.

Personal Income increased 0.2% in May, Spending increased 0.4% -- The BEA released the Personal Income and Outlays report for May: Personal income increased $37.1 billion, or 0.2 percent ... according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $53.5 billion, or 0.4 percent. ... Real PCE -- PCE adjusted to remove price changes -- increased 0.3 percent in May, compared with an increase of 0.8 percent in April. ... The price index for PCE increased 0.2 percent in May, compared with an increase of 0.3 percent in April. The PCE price index, excluding food and energy, increased 0.2 percent, the same increase as in April. The May PCE price index increased 0.9 percent from May a year ago. The May PCE price index, excluding food and energy, increased 1.6 percent from May a year ago. The following graph shows real Personal Consumption Expenditures (PCE) through February 2016 (2009 dollars). The increase in personal income was slightly less than expected. And the increase in PCE was at the 0.4% increase consensus.On inflation: The PCE price index increased 0.9 percent year-over-year due to the sharp decline in oil prices. The core PCE price index (excluding food and energy) increased 1.6 percent year-over-year in May. Using the two-month method to estimate Q2 PCE growth, PCE was increasing at a 4.1% annual rate in Q2 2016 (using the mid-month method, PCE was increasing 4.1%). This suggests solid PCE growth in Q2.

May 2016 Personal Consumption Growth At Expectations: The headline data this month continues to show consumer expenditure growth. This continues to be postive for 2Q2016 GDP if one considers GDP as a good measure of the economy. The negative of the headlines are that income grew at half the rate of expenditures. One should also note that year-over-year analysis shows both income and expenditures are softening.

Real Disposable Personal Income is up 3.2 % year-over-year (3.3 % last month), and real consumption expenditures is up 2.7 % year-over-year (3.0 % last month)

this data is very noisy and as usual includes moderate backward revision (detailed below) - this month the changes modified the year-over-year trends.

The third estimate of 1Q2016 GDP indicated the economy was expanding at 1.1 % (quarter-over-quarter compounded). Expenditures are counted in GDP, and income is ignored as GDP measures the spending side of the economy. However, over periods of time - consumer income and expenditure grow at the same rate.

The savings rate continues to be low historically, declined from 5.4 % last month to 5.3 % this month - which means the increase in consumption came at the expense of savings..

April Spending Exuberance Plunges Back To Earth In May As Income Growth Slows -- After an exuberant April, spiking hope that everything was awesome with a surge in spending, May has dragged US consumers back down to earth. The 1.1% (revised) jump in spending in April (highest since Aug 09) is over as May's 0.4% gain is back in the land of 'normal' once again. Income rose just 0.2% MoM (less than expected) slowing dramatically from last month to near the weakest YoY growth since March 2014. The savings rate fell once again on the back of this (down 0.1%) to 5.3%. With YoY Income growth almost the weakest since March 2014 and spending fading... Pushing the savings rate further down.. As spending eats into income...

When You Dial 911 and Wall Street Answers -- A Tennessee woman slipped into a coma and died after an ambulance company took so long to assemble a crew that one worker had time for a cigarette break.Paramedics in New York had to covertly swipe medical supplies from a hospital to restock their depleted ambulances after emergency runs.A man in the suburban South watched a chimney fire burn his house to the ground as he waited for the fire department, which billed him anyway and then sued him for $15,000 when he did not pay.In each of these cases, someone dialed 911 and Wall Street answered.The business of driving ambulances and operating fire brigades represents just one facet of a profound shift on Wall Street and Main Street alike, a New York Times investigation has found. Since the 2008 financial crisis, private equity firms, the “corporate raiders” of an earlier era, have increasingly taken over a wide array of civic and financial services that are central to American life.Today, people interact with private equity when they dial 911, pay their mortgage, play a round of golf or turn on the kitchen tap for a glass of water.Private equity put a unique stamp on these businesses. Unlike other for-profit companies, which often have years of experience making a product or offering a service, private equity is primarily skilled in making money. And in many of these businesses, The Times found, private equity firms applied a sophisticated moneymaking playbook: a mix of cost cuts, price increases, lobbying and litigation. In emergency care and firefighting, this approach creates a fundamental tension: the push to turn a profit while caring for people in their most vulnerable moments.

Restaurant Performance Index declined in May -- Here is a minor indicator I follow from the National Restaurant Association: RPI drops in MayDue in large part to softer same-store sales and customer traffic results, the National Restaurant Association’s Restaurant Performance Index (RPI) declined in May. The RPI stood at 100.6 in May, down 0.9 percent from a level of 101.6 in April. "The RPI continued along a choppy trend line in May, with the index bouncing between moderate gains and losses in recent months," said Hudson Riehle, senior vice president of research for the National Restaurant Association. "Much of the May dip came from declines in the same-store sales and customer traffic indicators, which softened from their stronger April performance. In addition, operators’ expectations for future business conditions are at the lowest level in three and a half years," he said. The index decreased to 100.6 in May, down from 101.6 in April. (above 100 indicates expansion).

International Trade in Goods June 27, 2016: Highlights Goods exports were soft in May while at the same goods imports rose, making for a widening in the nation's goods gap to $60.6 billion from April's $57.5 billion. Exports fell 0.2 percent reflecting declines in auto exports and, unfortunately, capital goods exports as well. Imports rose a sharp 1.6 percent with imports of consumer goods especially strong in a gain that points to business confidence in U.S. retail expectations. Imports of industrial supplies show a large gain made larger by upward price effects tied to oil. But like the export side, capital goods imports were weak hinting at contraction in business investment and continuing trouble for productivity growth. Though the import data is consistent with strong domestic demand, exports point to soft global demand. Note also that the widening of May's gap is a negative for second-quarter GDP.

Imports Collapse At East Coast Ports - If anyone needed another indicator that global trade is collapsing, look no further than the latest Port Authority of New York and New Jersey report on loaded imports for May. On Tuesday the Port Authority of New York and New Jersey reported that May loaded imports fell to 268,861 twenty-foot equivalent units, down 4.7% y/y. The total volume of containers passing through the port fell by 6.1% in May as well. Additionally, other major ports saw y/y declines as well. As the WSJ reports, loaded import volumes fell 2.3% y/y in May at the Port of Virginia, and total volumes were down 4.7%. At the port of Savannah, the East Coast's second largest port of entry for goods after New York, loaded imports fell 5% y/y, while total throughput was down 7.3% the Georgia Ports Authority said. With imports imploding, ocean shipping lines have been reducing the number of regular service calls in recent months, a clear indicator that they believe demand will remain weak for the foreseeable future until the new school year begins, which is typically when imports peak. However, that may not be the case this year says Ben Hackett, CEO of Hackett Associates, LLC, a research firm."The peak season has disappeared. Carriers have already taken out capacity, and if there was a strong peak season coming, they wouldn't do that. It's partly overall trade declining, but it's also that importers simply bought too much." Hackett said. Said otherwise, demand has slumped and companies have too much inventory as it is- which is precisely what we showed earlier this month when we reported that wholesale inventories had the biggest monthly jump in 10 months, with sales disappointing.

Rail Week Ending 25 June 2016: Rail Contraction Continues With Rolling Averages Mixed: Week 25 of 2016 shows same week total rail traffic (from same week one year ago) contracted according to the Association of American Railroads (AAR) traffic data. The short term rolling average's contraction continues to moderate. The deceleration in the rail rolling averages began over one year ago, and now rail movements are being compared against weaker 2015 data. A summary of the data from the AAR: For this week, total U.S. weekly rail traffic was 526,161 carloads and intermodal units, down 3.9 percent compared with the same week last year. Total carloads for the week ending Jun. 25 were 257,965 carloads, down 5.2 percent compared with the same week in 2015, while U.S. weekly intermodal volume was 268,196 containers and trailers, down 2.7 percent compared to 2015. Three of the 10 carload commodity groups posted an increase compared with the same week in 2015. They were miscellaneous carloads, up 20.7 percent to 10,559 carloads; grain, up 16.5 percent to 22,182 carloads; and motor vehicles and parts, up 2.7 percent to 19,339 carloads. Commodity groups that posted decreases compared with the same week in 2015 included petroleum and petroleum products, down 15.3 percent to 11,657 carloads; coal, down 14.3 percent to 77,514 carloads; and forest products, down 7.1 percent to 10,623 carloads. For the first 25 weeks of 2016, U.S. railroads reported cumulative volume of 6,031,201 carloads, down 13 percent from the same point last year; and 6,447,827 intermodal units, down 2.4 percent from last year. Total combined U.S. traffic for the first 25 weeks of 2016 was 12,479,028 carloads and intermodal units, a decrease of 7.8 percent compared to last year.

ATA Trucking Index increased in May - From the ATA: ATA Truck Tonnage Index Increased 2.7% in May American Trucking Associations’ advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index increased 2.7% in May, following a revised 1.7% drop during April. In May, the index equaled 139 (2000=100), up from 135.3 in April. The all-time high was 144 in February. Compared with May 2015, the SA index jumped 5.7%, which was up from April’s 2.4% year-over-year gain. ...“Following two consecutive decreases totaling 6 percent, May was a nice increase in truck tonnage,” said ATA Chief Economist Bob Costello. “Better consumer spending in April and May certainly helped, but economic growth remains mixed and I’d expect the recent choppy pattern in tonnage to continue for the next quarter or two. “We recently received good news on the inventory cycle, with the total business inventory-to-sales ratio declining for the first time in nearly a year. While one month doesn’t make a trend, this was good news for the trucking industry,” he said. Here is a long term graph that shows ATA's For-Hire Truck Tonnage index. The dashed line is the current level of the index. The index is now up 5.7% year-over-year.

U.S. Light Vehicle Sales decrease to 16.6 million annual rate in June --Based on a preliminary estimate from WardsAuto, light vehicle sales were at a 16.62 million SAAR in June. That is down about 2% from June 2015, and down 4% from the 17.39 million annual sales rate last month. This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for June (red, light vehicle sales of 16.62 million SAAR from WardsAuto). This was below the consensus forecast of 17.3 million SAAR (seasonally adjusted annual rate). The second graph shows light vehicle sales since the BEA started keeping data in 1967. Note: dashed line is current estimated sales rate. Sales for 2016 - through the first half - are up about 1% from the comparable period last year.

US Auto Sales Hit Record in First 6 Months - — U.S. auto sales may be slowing, but they still set a record in the first six months of this year.Sales through June were up 1.5 percent to 8.65 million, eclipsing last year's record of 8.5 million, according Autodata Corp.That was partly due to a strong June, which saw sales rebound after a disappointing May. Sales rose 2.5 percent to more than 1.5 million. Ford, Honda, Fiat Chrysler, Hyundai, Subaru and Nissan all reported gains for the month. Sales were down at General Motors, Toyota and Volkswagen.After six straight years of growth — and record sales of 17.5 million last year— U.S. sales are beginning to plateau. In the first six months of last year, for example, sales were up 4 percent, or more than double the pace of this year. But low gas prices, low interest rates, enticing new vehicles and strong consumer confidence should keep them at a very high level."As long as economic conditions — like low unemployment and easy access to credit — continue, the industry will be in a strong position through the busy summer sales months," General Motors Co. said its sales dropped 2 percent to 255,210, due in part to ongoing cuts in low-profit sales to rental car companies.Ford Motor Co.'s sales rose 6 percent to 240,109. Sales of its F-Series pickup — the nation's best-selling vehicle — jumped 29 percent to nearly 71,000 vehicles, or more than one every minute. But car sales fell 12 percent thanks to Americans' growing preference for SUVs. Sales at Ford's luxury Lincoln brand were up 6 percent.

Dallas Fed: Regional Manufacturing Activity declined again in June --From the Dallas Fed: Texas Manufacturing Activity Declines Again Texas factory activity declined again in June, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, posted a second consecutive negative reading but rose from -13.1 to -7.0, suggesting the pace of contraction eased somewhat from May. Other measures of current manufacturing activity also reflected continued declines this month. The new orders index held steady at -14.2, while the growth rate of orders index fell four points to -18.6. The capacity utilization and shipments indexes remained negative for a second month but edged up, coming in at -9.3 and -8.6, respectively. Perceptions of broader business conditions stayed pessimistic in June. The general business activity index has been negative since January 2015 and came in at -18.3 this month, up slightly from its May reading. Labor market measures indicated a sixth month of contraction in a row in June. The employment index fell to -11.5, its lowest reading since November 2009. The decline in the index was largely due to a falloff in the share of firms adding to headcounts.... Still grim in the Dallas region. The impact of lower oil prices is still impacting manufacturing.

Texas Manufacturing Remains Negative in June - Manufacturing activity is Texas continues to see pressure as the summer gets off to a start. The Federal Reserve Bank of Dallas has signaled that June’s manufacturing weakness continues despite the recent recovery in oil prices. Its index of general business conditions was shown to be -18.3 in June. Perhaps the May reading of -20.8 makes this reading look better, but the reality is that -18.3 is a significant contraction. The production index was not as bad at -7.0. While still negative, that is versus -13.1 in May. Oil and gas is driving this bus. . Data collected for this regional report were taken from June 14 to June 22, and 114 manufacturers in the Texas area responded to the survey. Firms were asked whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month. New orders were also in the red in June at -14.2, and the employment index was at a multi-year low of -11.5 in June. On employment, the Dallas Fed said. The decline in the index was largely due to a falloff in the share of firms adding to headcounts. Only six percent of firms noted net hiring in June, down from 16 percent last month and well below the 18 percent noting net layoffs. The hours worked index edged down one point to -12.8, signaling continued contraction in workweek length. Additional index readings were shown as follows:

the growth rate of orders index fell four points to -18.6;

the capacity utilization and shipments indexes remained negative for a second month but edged up, coming in at -9.3 and -8.6, respectively;

the company outlook index posted a seventh consecutive negative reading but rose 5 points to -11.0;

input costs rose for a third month in a row, as the raw materials prices index held steady at 12.6. Selling prices continued to decline, with the finished goods prices index edging down to -5.2 in June;

the wages and benefits index stayed positive and relatively unchanged at 21.6, suggesting a continued rise in compensation.

"This Is A Recession" - Dallas Fed Workweek Hits 7-Year Low -- The Dallas Fed Business Outlook has now been in contraction for 18 straight months. The underlying components are mixed but the average workweek has collapsed back to its lowest since Nov 2009. As one respondent noted, "This is a recession... Fed policy has us locked into a lethargic and tenuous position... We cannot have millions of people out of the workforce and be healthy economically - they are a burden not a benefit." The biggest drop in Dallas Fed workweek since 2009! The remarks from various Dallas Fed Survey respondents sums up the reality best... "The oil industry is suffering due to the crude price plunge worse now than in the 1980s. For the ninth month U.S. industrial production declined year over year. This is a recession. There is a continued significant negative impact due to the downturn in the energy industry as a result of weak commodity prices. Recent slight improvement in commodity prices is having no positive impact on business conditions, although it may be slowing the pace of deceleration in business activity." “The economy is nervous, shaky and uncertain. Fed policy has us locked into a lethargic and tenuous position. It appears the Fed doesn’t know how to get off the horse it created. The Fed talks interest rate increases but looks for every reason not to do it. Until the Fed backs out of trying to manage the economy, we will be stuck on the cusp of slow growth and a recession. Add the difficulty in getting commercial and retail financing and rising employee costs (health care, minimum wage threats and the ridiculous overtime executive order), and hiring for many of us will be minimal. We cannot have millions of people out of the workforce and be healthy economically - they are a burden not a benefit."

Richmond Fed Manufacturing Index June 28, 2016: Highlights Manufacturing activity in the Fifth District weakened in June, with the Richmond Fed Index falling further into contraction, dropping 6 points to minus 7 points after falling 15 points in May. New orders registered the sharpest fall, dropping 14 points to a minus 14, with order backlogs declining 4 points to minus 17 and capacity utilization down 4 points to minus 10. Declines were also registered on the employment front, with the number of employees down 5 points to minus 1 and the average workweek down 10 points to minus 4. For current company conditions, only wages, down 1 point to plus 14 and still the strongest component of the survey, and vendor lead time, down 5 points to plus 1, managed to stay above contraction levels. Prices of raw materials rose at a 1.25 percent annualized rate, a slightly slower pace than the May 1.27 percent pace, while finished goods prices rose at a 0.88 percent rate, up from 0.77 percent in May.

Earlier from Richmond Fed: Manufacturing Activity Declined in June --Earlier from the Richmond Fed: Manufacturing Sector Activity Declined; New Orders Decreased, Firms Continued to Increase Wages Fifth District manufacturing activity weakened in June, according to the most recent survey by the Federal Reserve Bank of Richmond. New orders and shipments declined this month, while backlogs decreased further compared to last month. Manufacturing employment softened, while firms continued to increase wages...Overall, manufacturing conditions weakened in June. The composite index for manufacturing dropped to a reading of −7. ...Manufacturing hiring softened in June. The index leveled off to a reading of −1, compared to last month's reading of 4. The average workweek index dropped 10 points this month to end −4. Average wage growth remained on pace with last month; that index slipped only one point to end at a reading of 14. This was the last of the regional Fed surveys for June.

Richmond Fed Manufacturing Survey Remains In Contraction In June 2016.: Of the five regional Federal Reserve surveys released to date, three are in expansion and two are in contraction. The actual survey value was -7 [note that values above zero represent expansion]. . New orders and shipments declined this month, while backlogs decreased further compared to last month. Manufacturing employment softened, while firms continued to increase wages. Prices of raw materials rose somewhat more slowly this month and finished goods prices rose slightly faster in June, compared to last month. Manufacturers' positive expectations faded in June. Producers anticipated mild growth in shipments and in the volume of new orders in the next six months. Compared to last month's outlook, backlogs and capacity utilization were expected to level off. Firms looked for vendor lead times to lengthen slightly during the six months ahead. Looking ahead, more survey participants expected slower growth in the number of employees and a shorter average workweek. However, an increasing number of firms anticipated wage increases. Producers expected faster growth in prices paid and received. Current Activity Overall, manufacturing conditions weakened in June. The composite index for manufacturing dropped to a reading of −7. The indicators for shipments and order backlogs remained in negative territory this month. Those indexes ended at readings of −3 and −17, respectively. The volume of new orders dropped sharply in June; the index lost 14 points, ending at −14. Additionally, the third component of the composite index, the employment index, flattened this month. That indicator moved down five points to end −1.

Chicago PMI June 30, 2016: Highlights Volatility is the name of the game when it comes to the Chicago PMI which surged in June to a 56.8 level that is far beyond expectations and follows a sub-50 contractionary reading of 49.3 in the May report. And there was no indication in the May report of the strength to come as both new orders and backlog orders were in outright contraction. But that was for May! For June, new orders are suddenly at their best level since October 2014 while backlog orders are rising at their fastest pace since May 2011. Production is now at its best level since January this year while inventories, in what may be a sign of intentional restocking given the strength in orders, are rising sharply from a 6-1/2 year low. A negative in the report is employment which is at its lowest reading of the recovery, since November 2009. Yet should the strength in orders extend to a second month, employment is bound to get a boost. This report covers both the manufacturing and non-manufacturing sectors of the Chicago economy.

Chicago PMI increased in June --Chicago PMI: June Chicago Business Barometer Up 7.5 Points to 56.8The MNI Chicago Business Barometer rose 7.5 points to 56.8 in June from 49.3 in May, the highest since January 2015, led by strong gains in New Orders and Production. June’s rebound was just enough to offset the previous two months of weakness, leaving the Barometer broadly unchanged over the quarter at an average of 52.2 in Q2 compared with 52.3 in Q1. New Orders increased sharply on the month to the highest since October 2014 ... “June’s sharp increase in the MNI Chicago Business Barometer needs to be viewed in the context of the weakness seen in April and May. Looking at the three-month average provides a better guide this month to the underlying trend in the economy with activity broadly unchanged between Q1 and Q2. Still, on a trend basis activity over the past four months is running above the very low levels seen around the turn of the year.” This was above the consensus forecast of 50.5.

Chicago PMI Spikes To 18-Month High - 7 Standard-Deviation Beat - As Employment Crashes?! - Seriously!! Chicago PMI spiked to 56.8 in June (from 49.3) - higher than the highest estimate and seven standard deviations above expectations. This is the highest since Jan 2015. Simply put, the number is beyond any credibility, as despite higher orders and output, demand for labor fell as employment contracted at the fastest pace since November 2009. Only 4 components rose in June as PMI soared above the forecast range 48.8 - 54 from 40 economists surveyed

Prices Paid fell compared to last month

New Orders rose compared to last month

Employment fell compared to last month

Inventory rose compared to last month

Supplier Deliveries fell compared to last month

Production rose compared to last month

Order Backlogs rose compared to last month

Business activity has been positive for 7 months over the past year.

PMI Manufacturing Index July 1, 2016: Highlights The final manufacturing PMI for June is little changed from the flash, down 1 tenth to a 51.3 level that points to no more than modest growth for the sector. But the news is mostly good in June, at least compared to May when the index was even weaker at 50.7. June saw a pickup in new orders and a 2-year high in export growth. Production was also up as was employment. But inventories were down as the sample, in a defensive move, keeps a lid on restocking. Coming up next is the closely watched ISM manufacturing where a modest 51.5 headline is expected.

US Manufacturing ISM Surges To 16-Month Highs (as Construction Spending Crashes) --US Manufacturing PMI fell back very modestly from its flash reading but rose MoM to 51.3 as Markit warns "producers are struggling in the face of the strong dollar, the energy sector decline and presidential election jitters." But, ISM Manufacturing surged full of hope to 53.2, above the highest analyst estimate (a 4 standard deviation beat of expectations). Every subcomponent rose aside from Prices Paid as it appears - as opposed to everything we have seen in earnings and chatter - that Brexit, election uncertainty has done nothing at all to dampen 'hope'. In the face of this seasionally-adjusted exuberance, construction spending has plunged almost 3% in the last 2 months - the biggest drop since Feb 2011. Another miracle of seasonal adjustments: ISM Components - all up but Prices Paid:

New orders rose to 57 vs 55.7

Employment rose to 50.4 vs 49.2

Supplier deliveries rose to 55.4 vs 54.1

Inventories rose to 48.5 vs 45.0

Customer inventories rose to 51.0 vs 50.0

Prices paid fell to 60.5 vs 63.5

Backlog of orders rose to 52.5 vs 47.0

New export orders rose to 53.5 vs 52.5

Imports rose to 52.0 vs 50.0

ISM Manufacturing index increased to 53.2 in June -- The ISM manufacturing index indicated expansion for the fourth consecutive month in June, following five months of contraction. The PMI was at 53.2% in June, up from 51.3% in May. The employment index was at 50.4%, up from 49.2% in May, and the new orders index was at 57.0%, up from 55.7% in May. From the Institute for Supply Management: June 2016 Manufacturing ISM® Report On Business®Economic activity in the manufacturing sector expanded in June for the fourth consecutive month, while the overall economy grew for the 85th consecutive month, say the nation's supply executives in the latest Manufacturing ISM®Report On Business®. "The June PMI® registered 53.2 percent, an increase of 1.9 percentage points from the May reading of 51.3 percent. The New Orders Index registered 57 percent, an increase of 1.3 percentage points from the May reading of 55.7 percent. The Production Index registered 54.7 percent, 2.1 percentage points higher than the May reading of 52.6 percent. The Employment Index registered 50.4 percent, an increase of 1.2 percentage points from the May reading of 49.2 percent. Inventories of raw materials registered 48.5 percent, an increase of 3.5 percentage points from the May reading of 45 percent. The Prices Index registered 60.5 percent, a decrease of 3 percentage points from the May reading of 63.5 percent, indicating higher raw materials prices for the fourth consecutive month. Manufacturing registered growth in June for the fourth consecutive month, as 12 of our 18 industries reported an increase in new orders in June (down from 14 in May), and 12 of our 18 industries reported an increase in production in June (same as in May)."

June 2016 ISM Manufacturing Survey Continues to Improve. Above Expectations.: The ISM Manufacturing survey remained in expansion for the fourth month after 5 months in contraction - and improved. The key internals likewise improved. The PMI manufacturing Index, also released today, is also in positive territory and marginally improved. The ISM Manufacturing survey index (PMI) marginally declined from 50.8 to 53.2 (50 separates manufacturing contraction and expansion). This was at expectations which were 50.0 to 53.0 (consensus 51.5). Earlier today, the PMI Manufacturing Index was released - from Bloomberg: The final manufacturing PMI for June is little changed from the flash, down 1 tenth to a 51.3 level that points to no more than modest growth for the sector. But the news is mostly good in June, at least compared to May when the index was even weaker at 50.7. June saw a pickup in new orders and a 2-year high in export growth. Production was also up as was employment. But inventories were down as the sample, in a defensive move, keeps a lid on restocking The regional Fed manufacturing surveys are mixed, and now the ISM indicates manufacturing shows expansion. Relatively deep penetration of this index below 50 has normally resulted in a recession. The noisy Backlog of Orders improved and returned to expansion. Backlog growth should be an indicator of improving conditions; a number below 50 indicates contraction. Backlog accuracy does not have a high correlation against actual data.

Solid June ISM report adds to evidence that shallow industrial recession is over: The ISM manufacturing index came in at a respectable 53.2 this morning. Perhaps more importantly, the new orders index came in at a very strong 57.0. Here is the chart supplied by the ISM: With the exception of contracting inventories, every other reading says a manufacturing sector that is in solid expansion, and as I have pointed out in the past, the inventory reading tends to hit maximum contraction right at the end of recessions, so this significant rebound is also evidence of a positive turn in manufacturing. Unfortunately, it appears that the ISM has revoked its permission for its data to be shared by the St. Louis FRED, so I don't have any updated graphs, but the 60 year history can be found in my post here from one month ago: http://community.xe.com/blog/xe-market-analysis/ism-new-orders-and-inven... This marks the second month in a row in which the national ISM has been contrary to the weaker regional Fed readings. Most likely some of this is due to the fact that only 5 Fed regions, most notably excluding Chicago and California, report. The bottom line is, this is more evidence that the shallow industrial recession is over, but again the proof will be in the Industrial Production pudding.

The Surprisingly Swift Decline of U.S. Manufacturing Employment - This paper finds a link between the sharp drop in U.S. manufacturing employment beginning in 2001 and a change in U.S. trade policy that eliminated potential tariff increases on Chinese imports. Industries where the threat of tariff hikes declines the most experience more severe employment losses along with larger increases in the value of imports from China and the number of firms engaged in China-U.S. trade. These results are robust to other potential explanations of the employment loss, and we show that the U.S. employment trends differ from those in the EU, where there was no change in policy.

NAFTA and China Aren't Responsible for Our Steel Woes | Mother Jones: Donald Trump stood in front of a pile of scrap metal yesterday in Pittsburgh and blasted both NAFTA and the accession of China into the World Trade Organization. He was positively poetic about how his trade policies would affect the steel industry: A Trump Administration will also ensure that we start using American steel for American infrastructure. Just like the American steel from Pennsylvania that built the Empire State building. It will be American steel that will fortify America's crumbling bridges. It will be American steel that sends our skyscrapers soaring into the sky. It will be American steel that rebuilds our inner cities. There's no question that the American steel industry has suffered over the past three decades, thanks to cheap steel imports from other countries. But this began in the 1980s and had almost nothing to do with either NAFTA or China. Take a look: Do you see a sudden slump in US steel production after NAFTA passed? Or after China entered the WTO? Nope. Other countries simply produced steel more cheaply than we did. It started with Japan and South Korea in the '80s and later migrated to other countries not because of trade agreements, but because Japan and South Korea got too expensive. And it's not as if no one noticed this was happening. Ronald Reagan tried tariffs on steel and they didn't work. George H.W. Bush tried tariffs again. They didn't work. George W. Bush tried tariffs a third time. No dice. For all his bluster, when it came time for Trump to lay out his plan to "bring back our jobs," it was surprisingly lame. It was seven points long but basically amounted to withdrawing from the TPP and getting tough on trade cheaters. This would accomplish next to nothing. TPP's effect is small to begin with, and we're already pretty aggressive about going after trade violations.

US Services Economy Disappoints As 'Optimism' Plunges To Record Lows - The June flash Services PMI printed 51.3, flat to May but below 52.0 bounce expectations with both employment down (3rd monthly drop in a row to lowest since Dec 2014) and optimism tumbling - "service providers indicated another drop in confidence regarding the year-ahead business outlook, with the latest reading the weakest since the survey began in late-2009."Commenting on the flash PMI data, Chris Williamson, chief economist at Markit said: “The survey data indicate that any rebound in the economy from the weak first quarter was largely confined to April, and that growth has since faded again. The June PMIs, which provide the first insight into national business activity in the second quarter, suggest the underlying rate of growth in the economy is only a meagre 1%. “Growth continues to be reliant on the service sector, with manufacturing acting as a drag on the economy. However, even the service sector has seen growth weaken in recent months, with firms citing increased uncertainty over the economic and political outlook both at home and abroad.“Business optimism was the lowest seen since the height of the financial crisis, with firms seeing greater hesitation in spending on services by business and households.“Uncertainty looks set to intensify in coming months and the UK’s shock vote to exit the EU exacerbates domestic worries about the presidential election.“Signs of weak economic growth and a sluggish labour market, combined with ‘Brexit’ uncertainty, suggest that already-cautious policymakers will be in no rush to tighten policy.”

College-Educated Workers Now Dominate the Labor Market - For decades, workers with a four-year degree have out-earned their less-educated peers. Now, they’re also the largest share of the labor market.That’s the finding of a new report from Georgetown University’s Center on Education and the Workforce. This year marked the first time college-educated workers, now 36% of the workforce, outnumbered those with a high-school degree or less. The share of the workforce with a high school diploma or less dropped to 34%, down five percentage points from 2007. That’s because the vast share of the 11.6 million jobs gained in the recovery — 73% — went to those with bachelor’s degrees or higher, according to the report. “We really do have a nation of people who are post-secondary ‘haves’ and post-secondary ‘have-nots,’” said Anthony Carnevale, the center’s director and one of the report’s authors. “It is definitely something that divides us, both in economic and apparently in cultural terms.” Several other factors helped tip the balance in favor of college grads: Many high-school graduates returned to college during the recession, and demographic changes in the composition of the workforce have been a factor. But Mr. Carnevale said it was also because college-educated workers and workers with an associate’s degree or some college are taking the middle- and low-skill jobs that formerly went to high-school graduates. Workers with just a high school diploma or less were hit hard by the recession, losing 5.6 million jobs between December 2007 and January 2010, the report said. As a group they gained just 80,000 jobs in the subsequent six years. But those with a bachelor’s degree or higher added 187,000 jobs during the recession, then gained another 8.4 million during the recovery

A Tricky Task: Government Tries to Define the Gig Economy -- Before the government can measure the size of the gig economy — or is it the sharing economy? The digital economy? — the sector needs to be defined. TheCommerce Department recently proposed a four-part definition for what it calls “digital matching firms” and identified more than 100 businesses that likely meet that definition. They range from Uber, the seemingly ubiquitous ride-hailing service, to LeftoverSwap, a now defunct app that allowed users to give away uneaten food.The new definition, released in a paper earlier this month, is intended to give government data crunchers and private researchers the characteristics that make up this emerging sector. Setting a framework will aid future data collection, including a joint effort by the Census Bureau, a division of Commerce, and the Bureau of Labor Statistics to produce a report on contingent workers for the first time since 2005. “In order to have good policy making, you have to have good data,” said Justin Antonipillai, Commerce’s acting under secretary for economic affairs. “And good data and statistics start with a definition.” Under the Commerce definition, digital matching firms:

Use technology such as mobile apps to facilitate peer-to-peer transactions

Weekly Initial Unemployment Claims increase to 268,000 -- The DOL reported: In the week ending June 25, the advance figure for seasonally adjusted initial claims was 268,000, an increase of 10,000 from the previous week's revised level. The previous week's level was revised down by 1,000 from 259,000 to 258,000. The 4-week moving average was 266,750, unchanged from the previous week's revised average. The previous week's average was revised down by 250 from 267,000 to 266,750. There were no special factors impacting this week's initial claims. This marks 69 consecutive weeks of initial claims below 300,000, the longest streak since 1973. The previous week was revised down by 1,000. The following graph shows the 4-week moving average of weekly claims since 1971.

Donald Trump Sees Trade Plan Resulting in Better Jobs, Higher Prices --Donald Trump on Thursday said his trade proposals would mean better jobs for American workers and higher prices for U.S. consumers. Speaking at a shuttered factory in Manchester, N.H., Mr. Trump reiterated large segments of the trade speech he made Tuesday, reading from notes the steps he would take to pull out of the North American Free Trade Agreement and the Trans-Pacific Partnership while formally labeling China a currency manipulator. But for the first time the presumptive Republican presidential nominee said that the effects of his policies would be to drive up prices for American consumers, which he said would be worthwhile if it meant manufacturing jobs are relocated from abroad back to the U.S.“We’re better off paying a little bit more and having jobs,” Mr. Trump said. “It was a much better system, the way it used to be.” Mr. Trump added that it would be better for the U.S. economy if products cost more and more Americans were employed. “A lot of people say, ‘Oh, well the goods will be cheaper, they’ll come in and they’ll be cheaper,’ ” Mr. Trump said. “Yeah, but we lost all our jobs. So we’re better off if they’re not quite as cheap and the goods will also be of a higher quality, because we do a higher quality good and we’re known for that. But all of a sudden, the jobs are gone and frankly, the goods can come in cheaply, but people don’t have any money to buy them, and that’s a problem.”

MythBusted...Rising "Not in Labor Force" Only Partly Due to Retiring Boomers...Since '00, Many Are Gen X & Millenials: Conventional wisdom has it that the fast rise of the "not in labor force" since 2000 is due to 55+yr/old baby boomers moving into retirement. The answer to this question...sorta yes and sorta no. First, what is "not in labor force"? The labor force is made up of the employed and the unemployed, 16 years old or older. The remainder—those who have no job and are not looking for one—are counted as "not in the labor force". The chart below shows the rising numbers of those not in the labor force and the acceleration since 2000. The source of the accelerating growth in the "not in labor force" has shifted from 100%+(net) coming from among the 55+yr/olds (moving from the work force into retirement) to the current split of only 65% from among the 55+ versus 35% from the core 16-54yr/old cohort. The changing source of not in labor force is exactly opposite of the historical norm and opposite conventional wisdom. It is also an economic cancer as these millions from among the 16-54 are not building job skills, savings, or self sufficiency. They will not be home buyers nor drive economic activity. They will essentially be a lifelong societal burden. First (below) a review of the 25-54yr/old total population, total employees among the 25-54yr/olds, and full time jobs among the 25-54yr/old population (available since '00). The 25-54 core population makes up roughly 70% of the entire workforce and this period is (on average) the most

Lowest Unemployment Since 2007 Has More Employers Poaching Talent: As the economy and employment situation continue to improve, job seekers are finding better jobs and finding them more quickly. Now, after years of underemployment or being "stuck" in undesirable jobs, there is mounting evidence that, despite the risks and challenges, a growing number of Americans are seeking employment while employed. The latest evidence of the employed job search comes from global outplacement consultancy Challenger, Gray & Christmas, which revealed that nearly 60 percent of callers to its annual job-search advice hotline were employed. That is up from 29 percent a year earlier and 32 percent in 2013. This marks a tipping point in the employment market that denotes a shrinking labor pool that comes with an improving economy. The unemployment rate nationwide is at 4.7 percent, the lowest level since 2007. And, in many metropolitan areas the jobless rate is even lower. In fact, 110 metropolitan areas have an unemployment rate under 4.0 percent. The falling unemployment rate means a shrinking labor pool from which employers can pluck new workers. So, these employers are compelled to seek out fresh candidates from among the employed. They should have plenty to choose from, as millions of Americans are still in part-time jobs or in jobs for which they are overqualified. Thus, the increased desire to change jobs.

Is The US Locking Up Its Available Male Labor Force? -- A few years ago we noted an extremely disturbing trend, namely that there was never a lower percentage of white men over 20 working in America. The decline in labor force participation rate for males ages 25-54 has accelerated sharply since 1980, and we may have an answer as to why. Here is the labor force participation rate for men ages 25-54. Although the downward trend is clear since it topped out out 97.9% in 1954, a notable accelerated decline takes place since 1980, which as of May 1, 2016 put the rate at 88.4%. As the WSJ points out, there is a sharp divergence in participation rates by educational attainment. Which one could argue is evidence of the declining middle class in America, as blue-collar jobs are disappearing. There is one more critical chart that the WSJ provides that is notable however, and is something to consider. As the decline in labor force participation for working age males has accelerated its decline since 1980, male prisoners who have been incarcerated has accelerated in the complete opposite direction. Is the male labor force collapsing because more and more are being sent to prison? The data certainly shows that is a possibility. Here is a look at how the US imprisonment rate has grown since 1880 - look at the pop since 1980.

A Mid-Year Burst of Minimum Wage Increases Starts on July 1 -- On July 1, 14 U.S. cities, states and counties, plus the District of Columbia, will raise their minimum wage in a mid-year burst that reflects the legislative momentum to boost pay floors across the country while federal legislation stalls. In total, the minimum wage will rise in 15 places: two states – Maryland and Oregon, plus Washington, D.C., Los Angeles County, Calif., and 11 cities. That includes Chicago, eight cities in California and two in Kentucky, according to a new analysis by the right-leaning Employment Policies Institute. A newer twist is that the boosts are reaching higher overall levels than in the past. While the federal minimum wage has been $7.25 an hour since 2009, cities and states are embracing increases that go as high as $15 an hour. San Francisco’s minimum wage, which will rise to $13.00 Friday from $12.25, is set to reach $15 by 2018. Chicago’s minimum, which will jump to $10.50 an hour Friday from $10.00, is set to reach $13 by 2019. The mayor of the nation’s capital this week signed legislation that will raise the minimum wage there to $15 by 2020. And the states of New York and California approved eventual $15 levels earlier this year.

The 99% Got a Raise Last Year, But Not Enough to Dent Rising Inequality - WSJ: Here’s the good news After getting short shrift for years after the recession, families in the bottom 99% of earners finally saw some noticeable income growth in 2015. Even adjusted for inflation, average incomes across that huge swath of households grew 4.7% from 2014. But don’t break out the champagne (or boxed wine) just yet. Everyone else–that is, those in the top 1%–saw their incomes grow nearly twice as fast, by 7.7%. The new figures come from University of California-Berkeley economist Emmanuel Saez, the man whose analyses (with collaborator Thomas Piketty) went mainstream when Occupy Wall Street took up the chant, “We are the 99%.” As the job market has tightened, more workers have come off the sidelines and minimum wages have spread, earnings are finally picking up for a larger group of workers. Mr. Saez finds that real incomes for the 99% had retraced, by 2015, about two-thirds of the losses borne between the recession of 2007-2009. Family incomes for the bottom 99% “have finally started recovering in earnest from the losses of the Great Recession,” Mr. Saez writes. “Nevertheless, income inequality remains extremely high.” Indeed, families in the top 1% have still reaped the lion’s share of earnings. Since 2009, when the recession ended, the top 1% captured 52% of total real income growth. The researchers defined the 1% as families with incomes above $443,000 in 2015.

Why Income Inequality Will Get Worse Before It Gets Better -- naked capitalism - Yves here. I seldom put up a post to use as an object lesson, but this one is a case study in how soi disant progressives have internalized the neoliberal world view and are therefore unable to either challenge its working or come up with adequate remedies. In the article below, the author not just accepts but actually promotes the notion that “disruptors,” which is the Silicon Valley buzz phrase for companies that break the law but have been allowed to get away with it, are something we need to tolerate. I know far too many people who consider themselves to be left-leaning who have no compunction about using Uber, despite the fact that they live in areas that are reasonably to very well served by cabs. Uber is perceived to be cool because you get to use your smartphone, when people who use Uber should be shamed unless they have a legitimate reason (for instance, blacks are regularly shunned by cabs, and cabs drivers tell me they don’t like going to the outer boroughs of Manhattan, not because they get fewer hails so much as they get stiffed on those rides far more often than on rides within Manhattan or to and from airports). In other words, people who like to style themselves as Good Progressives are all too happy to take a cheap deal even when they know it involves screwing workers (I’ve spoken to a couple of cabbies outside NYC who looked into applying for Uber and abandoned the idea when they worked through the math. Uber pays less than a cab ride of a comparable distance and takes a cut of driver pay on top of that. And this was in cities where cab fare was not all that high to begin with). But not surprisingly, the author runs an apps-based company, and therefore is personally invested in the Silicon Valley primacy of technology and markets world view.

The U.S. Now Ranks 19th in ‘Social Progress,’ With Finland and Canada Topping the List -- The United States has fallen to 19th place in a global ranking of well-being, down three spots from last year. That’s according to the 2016 edition of the Social Progress Index, one of the most comprehensive international measures of well-being. America was eclipsed by Belgium, Spain and France in the past year according to the measure, which evaluates countries on their ability to provide basic human needs (measures of water and shelter), the foundations of well-being (measures of health and education) and opportunity (measures of equality and personal rights). The U.S. is the world’s largest economy as measured by gross domestic product, but the Social Progress Index was designed by those who see shortcomings in the traditional measure of GDP, because they do not take into account things like the health of the population, or crime, or the environment or even whether citizens have basic human rights. The index, for example, could be a better measure whether nations are making progress against the “Global Goals” of the United Nations. Across a number of such “non-economic” measures, the U.S. fares particularly poorly for a rich nation, according to the index, because of its high obesity rate, high homicide rate, high level of traffic fatalities and unequal access to higher education. U.S. citizens “are getting a pretty raw deal when it comes to translating the country’s wealth into social progress,” said Michael Green, executive director of the Social Progress Imperative, which produces the index. Finland topped the index this year, followed closely by Canada, Denmark, Australia and Switzerland. The diversity of the countries atop the list underscores that there is not just one path to prosperity, said David Cruickshank, the global chairman of Deloitte, which is a partner in producing the index.

750,000 Californians Past The Age Of 65 Are Still Working - Regular readers are well aware that residents are rushing out of California in droves for many reason, least of which is the high cost of living. For those older California residents that choose to stay however because they simply can't uproot their lives and start "fresh" somewhere else, the reality is even more gruesome as they have no choice but to continue working into their retirement years. More than 740,000 Californians between the ages 65 and 74 are still employed or looking for work the Sacramento Bee reports, and the reasons are largely attributable to money. As the Sacramento Bee reports, more than 740,000 California residents between ages 65 and 74 are employed or looking for work, roughly double the number from 15 years ago, according to a Sacramento Bee review of the latest census data. Much of that growth reflects a swell of baby boomers entering retirement age. But the proportion of California seniors between ages 65 and 74 still working or looking for work also has risen, going from 20 percent in 2000 to 26 percent in 2014. Californians are working longer for a number of reasons. Some do not have enough money to retire or are among a growing number of seniors living in poverty. Others are waiting to collect their full allotment of Social Security payments as the federal retirement age gradually rises from 65 to 67. Many are simply in good health and want to keep working as life spans increase. The percent of Californians ages 65-69 who are still working or looking for work has increased dramatically since 1990, and still remains well over 30%. The percent of residents between 70-74 who are still working or looking for work has trended up since 1990 as well, although much more gradually, and remains just under 20%.

Inequality Has Grown in All 50 States - CBPP -- The gaps between the richest and poorest families have grown in every state since the late 1970s, a new report from the Economic Policy Institute shows. The top 1 percent’s share of income is close to its 1928 peak (see chart). The report’s alarming findings include:

In 2013, the average income of the top 1 percent of families nationally was $1.2 million — more than 25 times the average income of the bottom 99 percent.

The lion’s share of income growth since the late 1970s has gone to the richest households.

The top 1 percent’s share of income rose in every state and the District of Columbia — and it doubled nationally, from 10 percent to 20 percent — between 1979 and 2013.

Since 2007, due to the Great Recession, family income at all levels has fallen and income gaps narrowed somewhat. On the other hand, the richest families have benefitted most from the economic recovery. In 24 states, the top 1 percent captured at least half of all income growth between 2009 — the year the recession officially ended — and 2013.

This Is Where Whites In America Are A Minority - New research out by the Pew Research Center shows an interesting development in the United States. Using Census Bureau information released with 2014 population estimates, Pew found that the US is becoming ever more diverse, at the local level as well as nationally. In 2014, 364 counties, independent cities and other county-level equivalents did not have non-Hispanic white majorities, the most in modern history, and more than twice the level in 1980. The increase in the number of counties that did not have a non-Hispanic white majority was due in large part to the growth of the Hispanic population. From Pew Research That year – the first decennial enumeration in which the nation’s Hispanic population was comprehensively counted – non-Hispanic whites were majorities in all but 171 out of 3,141 counties (5.4%), according to our analysis. The 1990 census was the first to break out non-Hispanic whites as a separate category; that year, they made up the majority in all but 186 counties, or 5.9% of the total. (The Census Bureau considers Hispanic to be an ethnicity rather than a race; accordingly, Hispanics can be of any race.) Since then, the nation’s Hispanic population has more than doubled, from 22.4 million to 55.4 million, powering the increase in majority-minority counties. Last year, 94 counties had Hispanic majorities – just over twice the number of majority-Hispanic counties in 1990 (45), and one more than the number of counties last year with non-Hispanic black majorities Overall, non-Hispanic whites are less than a majority in four states, and in a further indication of just how diverse the US is becoming, in none of those states does a single racial or ethnic group have a majority. All in all, non-Hispanic whites are less than a majority in four states – California, Texas, New Mexico and Hawaii – as well as the District of Columbia. In fact, in none of those places does a single racial or ethnic group have a majority: California has almost equal shares of Hispanics (38.6%) and non-Hispanic whites (38.5%); non-Hispanic whites are the plurality in Texas (43.5%); Hispanics in New Mexico (47.7%); blacks in D.C. (47.4%); and Asians in Hawaii (36.4%).

Rising Death Rates for Middle-Aged White Americans Are Forcing a Policy Rethink - Top economists are warning that the alarming uptick in mortality for middle-aged white Americans will force policymakers to rethink the U.S. social safety net. A report released by the Brookings Institution’s Hamilton Project is the latest paper to highlight how opioids, suicide and chronic liver disease are becoming a greater cause of death among whites age 45 to 54. While middle-age blacks and Latinos have seen steady declines in their mortality in recent years, whites in the same age group saw their mortality increase about 10% between 1999 and 2014. These white Americans have been hard hit by the loss of manufacturing jobs, and the fact that their lifespans are suffering correlates with ample research showing that earning less is tied to dying earlier. Now economists are warning that what may seem like a traditional public health problem is a much thornier puzzle that calls for rethinking everything from early childhood education to how the federal government divides up Social Security checks. “This is a world in which people are dying that shouldn’t be dying,” Angus Deaton, a 2015 Nobel Prize winner and an economist at Princeton University, told an audience at Brookings on Wednesday. Anne Case, another Princeton economist who has researched the topic extensively, calls this swell of non-accidental fatalities the “deaths of despair.” “Men and women with a high school degree or less are being hammered here,” she said. Patients are reporting higher levels of pain than they used to, and those who do also show greater social isolation. What’s confounding researchers is that this is a uniquely American phenomenon. Europe’s economic woes haven’t had the same impact on life expectancy.

Puerto Rico Needs Tools to Help It Carry Out A Necessary Restructuring: The Hill has published my column on PROMESA (the bill that sets out a framework for fiscal oversight and territorial debt restructuring that passed the House earlier this month and that the Senate is taking up this week). I support the bill. Puerto Rico cannot continue to rely on fiscal gymnastics to delay an inevitable default, and needs to start building its budgets around credible estimates of revenues. The game of passing budgets that balance only thanks to overestimating revenue—and then finding ever-more-creative ways to cover the cash flow gaps that inevitably arise—needs to end. Puerto Rico desperately needs legal tools to organize its incredibly complex debt stock into a vote, and ultimately reach agreement with its creditors, the oversight board, and the court on a new payment structure. A few additional points: Puerto Rico’s nominal GDP growth over the past years has averaged about 1 percent. The nominal interest rate on Puerto Rico’s tax supported debt is about 5 percent. The basic debt dynamics are bad. Contractual debt service on the tax-revenue supported debt is about 5 percent of Puerto Rico’s GNP (counting amortization payments, which tend to be modest). There is no way Puerto Rico can, nor should, run a primary surplus sufficient to cover all these payments. The new oversight board isn’t just needed to increase the credibility of Puerto Rico’s budgeting. It also should use its powers over the restructuring process to help guide the needed adjustment of Puerto Rico’s debts so Puerto Rico can avoid Greek style austerity.

Treasury secretary urges Senate to pass Puerto Rico bill before next debt default -- The US Senate must take immediate action to address Puerto Rico’s $70bn debt crisis, Treasury secretary Jack Lew said on Monday, days before the near bankrupt territory looks set to default on its debts once more. In a letter addressed to Senate leadership, Lew called on Congress to pass a bill addressing the issue before the US territory defaults on a $2bn debt payment this Friday. “On 1 July – only four days from now – the crisis in Puerto Rico will ratchet up to an even higher level. Puerto Rico has $2bn in debt payments coming due that day, including payments on constitutionally prioritized debt on which Puerto Rico has not previously defaulted,” Lew wrote. He pointed out that the US House of Representatives already passed a bill earlier this month on 9 June that would “give Puerto Rico the tools to recover without any federal spending” and urged the Senate to vote on it “immediately”. The Senate is expected to vote on the matter this week before leaving for the 4 July holiday. If the Senate passes the bill but amends it, the House will have to vote on it again next week when it is back in session, which could be too late for Puerto Rico. “I urge Republicans and Democrats to come together in the Senate as you have before to help our fellow citizens, and get a bipartisan bill to the President’s desk before 1 July,” Lew pleaded with the US Senate. Others warned of what might happen if the bill did not pass before the end of the week. “If legislation doesn’t pass before 1 July, we are opening the door for vulture funds to exploit Puerto Rico,”

Puerto Rico makes historic default on general obligation bonds - Puerto Rico just did something that hasn't happened since 1933. The deeply indebted island defaulted Friday on debt that is supposed to be guaranteed by the Puerto Rican constitution. In other words, Puerto Rico was supposed to pay creditors who hold general obligation bonds before paying anyone else, even police. But Governor Alejandro García Padilla said: No. He argued that paying teachers, emergency personnel and other critical needs must come first. "This administration continues to take historic steps to ensure the residents of Puerto Rico continue to receive essential services while the commonwealth continues to face a delicate financial situation," a spokesman said Thursday. The island isn't planning to make any of the $800 million payment to its bondholders due on July 1. Puerto Rico's government says it is in a "dire" financial position with only about $350 million in cash on hand right now. Puerto Rico's default Friday marks the first time that a state or state-like entity (Puerto Rico is a U.S. territory) has failed to pay general obligation bonds since the Great Depression.

Puerto Rico Defaults On $2 Billion In Debt Payments - As expected, Puerto Rico will default on about $2 billion in debt payments Friday,including $780 million in constitutionally-backed general obligation bonds, as governor Alejandro Garcia Padilla has issued an executive order authorizing the suspension of payments. In addition, Garcia Padilla also declared states of emergency at the island's biggest public pension - the Commonwealth's Employee Retirement System - which is more than 99% underfunded, as well as the University of Puerto Rico and other agencies Reuters reports. The default will mark the first time a US territory has failed to pay on its general obligation bonds. "Under these circumstances, these executive orders protect the limited resources available to the agencies listed in these orders and prevents that these can be seized by creditors, leaving Puerto Ricans without basic services," Garcia Padilla's administration said in a statement. The suspension of payments comes just as the Senate rushed a bill to President Obama that was signed on Thursday, and the bill will now allow Puerto Rico to access a bankruptcy-like debt restructuring process for its roughly $70 billion in debt. As Bloomberg explains, the next phase will now be for the US appointed control board to begin the restructuring negotiation process. The step allows Garcia Padilla to use cash that would otherwise go to investors to avert cuts to schools, policing and health care that Garcia Padilla said would extract a heavy toll on the island where nearly half of the 3.5 million residents live in poverty. While creditors will now be left to battle it out in the courts, the default will leave large insurers of Puerto Rico's bonds on the hook for payments. As CNBC reports, Assured Guaranty, Ambac and National, a wholly owned subsidiary of MBIA, collectively have more than $800 million in exposure to the total payments due Friday. Assured Guaranty and MBIA back $196.5 million and $173 million in GO bonds respectively. Ambac's largest exposure are $41.7 million in rum tax bonds and $38.6 million on the Public Building Authority GO-guaranteed securities.

10 shootings a day: Complex causes of Chicago's spiking violence: To understand Chicago's violence, start at Kostner Avenue and Monroe Street and walk west up a one-way stretch of graystones and brick two-flats. There on a boarded-up front door you'll see the red stain of gang graffiti. On the cracked sidewalk below lies an empty heroin baggie. Hardened young men sit on a porch. This single block on the West Side — part of the Harrison police district — has been the scene of at least six shootings so far this year. A masked gunman shot a teen in the stomach. A father delivering groceries to his daughter was shot before he could escape gunfire. And just last week, police again unspooled the yellow crime scene tape in the alley behind the block after a teen was fatally shot in the head. As Chicago heads into the often violent July Fourth weekend, these kinds of stories are all too common in pockets of the West and South sides. At the halfway point of the year, homicides have jumped by 49 percent citywide to 312 through Tuesday, reaching levels unseen since the late 1990s. Shooting incidents have risen by even more, marking the third consecutive year of double-digit increases. While it doesn't rank as the nation's murder capital on a per-capita basis, Chicago is the runaway leader in the sheer volume of killings and shootings. New York and Los Angeles don't even come close. Through June 19, Chicago had more homicides than those two larger cities combined, records show. The two combined had fewer than 1,000 shooting victims during that same period, while Chicago by Tuesday topped 1,900 — about 10 a day.

Flower Mound man faces billions in fines for storing wood --- Flower Mound resident Kirk Grady owned some Hunt County property with a woodpile for about three years before he sold it in 2002. Hunt County now wants to collect as much as $2 billion from him in fines for improper waste disposal, he says. Hunt County sued Grady in Travis County last year, and Grady is fighting back with a federal lawsuit. Grady's Dallas attorney, Michael R. Goldman, blames the "ridiculous and unconscionable" legal action on the county's hiring of a private law firm to prosecute the state lawsuit with a contingency-fee provision. That means the law firm gets to keep a percentage of whatever is collected. That has given the firm a perverse incentive to sue for as much money as possible, said Goldman. And critics say some elected officials could use the law to reward lawyers who give money to their campaigns, as was alleged in a Dallas case. Such contingency-fee arrangements are legal under Texas law. The law, passed almost 50 years ago, gave local governments the authority to file lawsuits seeking civil penalties for alleged violations of the state's environmental laws. Grady is challenging that law as unconstitutional in the federal lawsuit filed last month in Dallas. Goldman said there are currently about 50 such cases across Texas because law firms seeking big payouts are pitching these arrangements to mostly smaller cities and counties. He said the sales pitch is that local governments have zero risk and can earn potentially big revenue from enforcing state environmental laws.

Texas high court sides with family who let kids skip schoolwork in wait of 'rapture' --The Texas Supreme Court has ruled in favor of a family who were homeschooling their children but not teaching them, since they believed they would soon be “raptured.” The Lone Star State’s highest court voted 6-3 in favor of the family on a technicality. Laura and Michael McIntyre claimed their Fourteenth Amendment right had been violated when the El Paso school district attempted to discover whether their children were learning. The district had also filed charges of truancy, but later dropped them. At the heart of the issue is the question of where to draw the line between individual parents' liberties to educate their own children and requirements designed to ensure that homeschooled children are learning at an acceptable rate. While the court ruled in favor of the family in this specific instance, they did not address the more fundamental issue, a development that could be important as the number of Americans choosing to homeschool their children rapidly grows. Ms. McIntyre started educating some of her nine children about 10 years ago.

Police Called To Elementary School After 3rd Grader Makes 'Racist' Comment About A Brownie -- Via Philly.com: On June 16, police were called to an unlikely scene: an end-of-the-year class party at the William P. Tatem Elementary School in Collingswood.A third grader had made a comment about the brownies being served to the class. After another student exclaimed that the remark was “racist,” the school called the Collingswood Police Department, according to the mother of the boy who made the comment.The boy’s father was contacted by Collingswood police later in the day.Police said the incident had been referred to the New Jersey Division of Child Protection and Permanency. The student stayed home for his last day of third grade.Dos Santos said that her son was “traumatized,” and that she hopes to send him to a different Collingswood public school in the fall.“I’m not comfortable with the administration [at Tatem]. I don’t trust them and neither does my child,” she said. “He was intimidated, obviously. There was a police officer with a gun in the holster talking to my son, saying, ‘Tell me what you said.’ He didn’t have anybody on his side. First off, we don’t even know what the kid said, and if it was in fact racially offensive. According to the article, “another student exclaimed that the remark was racist,” so what was actually said? Did the teacher actually hear the comment? It’s possible one kid merely decided to call it racist knowing the other kid would get in trouble. I’m not saying this is what happened, but it’s happened before. For example, recall the case of Ethan Chaplin as highlighted in the 2014 post, New Jersey Threatens to Take 13-Year-Old Student From His Father Due to “Non-Conforming Behavior”: This is the story of Ethan Chaplin, who back in April was twirling a pencil in his seventh grade classroom in Vernon, NJ. One of the class bullies saw an opportunity to be a jerk and yelled: “He’s making gun motions, send him to juvie.” Rather than demonstrating any sort of common sense, the teacher apparently had a panic attack and reported him, which resulted in a two-day suspension.

Chicago Is Pushing For A Massive Bailout Of Its Public School System -- It is well known that Chicago's pension liabilities have completely decimated the city's finances and currently stand at close to $20 billion. Faced with a significant challenge of meeting funding obligations as a result of a 2010 state law, Mayor Rahm Emanuel recently won a slight reprieve in the amount of money the city would have to contribute to fund the liabilities over the next few years, as recently Illinois lawmakers overrodeGovernor Bruce Rauner's veto and will now change the legislation in order to allow the city to defer payments to fund pensions. Under the prior legislation, Chicago was required to have its public safety workers pensions 90% funded by 2040, and called for an $834 million payment to be made in 2016 alone. The revised legislation reduces that amount to $619 million, and allows for smaller increases through 2020 while pushing the timeline for 90% funding out to 2055 - at which time the timeline will be extended once again of course, as it will never be possible for the City to come up with such funds. Perhaps riding high on that small victory, Rahm Emanuel is now quietly asking the city to change investment rules that would allow Chicago to purchase debt from sister agencies such as the Chicago Public School system - said differently, Rahm Emanuel wants to bail out the Chicago Public School system.

CPS will make $676 million teacher pension payment, then what? -- The Chicago Public Schools will make a $676 million payment to the Chicago Teachers Pension Fund due Thursday even though that massive payment will leave the nearly bankrupt school system with just $24 million in the bank. “Chicago Public Schools will make that pension payment. . . . In the last two years, the city of Chicago has made more pension payments to the Chicago Teachers Pension Fund than the preceding 15 years. Payments weren’t made by Springfield or anybody else, and that was wrong,” Mayor Rahm Emanuel said Monday. Emanuel said CPS would “not have a financial challenge” if Chicago taxpayers were not paying twice — through property taxes for the pensions of their own teachers and through income taxes for the pensions of teachers outside the city. “So, we’re gonna do what’s right. But it’s time for the state to do what’s right. Fix a broken educational formula that makes Illinois 48th out of 50th in state funding of education. And when you come to say that the formula is broken, but I want to double down on it, that’s not the right choice. You’re penalizing poor kids, kids of color across the state of Illinois,” the mayor said. CPS has no choice but to make that payment in full, whether or not Springfield rides to the rescue with a standalone education budget. To do otherwise would probably mean losing future access to the credit markets and slipping dangerously further into junk bond status and possibly dragging the city’s bond rating down with it. But after making that payment in full, CPS will have nearly depleted its cash reserves.

Teachers Unions Vs Hedge Funds: The Battle Over Billions - Randi Weingarten is the president of the American Federation of Teachers, and is a name that hedge fund managers and those on Wall Street are beginning to learn quite well. About a decade ago, some liberals joined conservatives in pushing to expand charter schools. As the WSJ reports, those efforts received financial support from hedge fund managers including Dan Loeb, Paul Singer and Paul Tudor Jones, who together kicked in millions of dollars toward the effort. Some involved in the effort to push for the expansion of chartered schools portrayed public school teachers and their unions as obstacles to improving education, and thus the reputation of unions took a beating. Enter Randi Weingarten. Weingarten was elected president of the American Federation of Teachers in 2008, and her aim was to restore public trust in public school teachers and their unions. Weingarten's federation represents about two dozen teachers unions whose retirement funds have a total of $630 billion in assets, a large portion of the more than $1 trillion controlled by all teachers unions according to the WSJ. Although the unions themselves control where the money is invested, Weingarten can make recommendations. Weingarten instructed investment advisers at the federation's Washington headquarters to sift through financial reports and examine the personal charitable donations of hedge fund managers, focusing on those who want to end defined benefit pensions, and entities backing charter schools and the overhauling of public schools. In early 2013, the union federation published a list of roughly three dozen Wall Street asset managers it says donated to organizations that support causes opposed by the union, and the federation wanted union pension funds to use the list as a reference guide when deciding where to invest (or not invest) their money. Said otherwise, if asset managers don't support unions, the unions won't invest with the funds.

Pell Grants for prisoners moves forward, roughly 12,000 inmates expected to participate - POLITICO: The Obama administration early Friday said roughly 12,000 prison inmates will be able to go to college — using Pell Grants paid for by taxpayers. The pilot program, which is sure to receive pushback from GOP lawmakers, is known as “Second Chance Pell.” For the first time in more than 20 years, it allows prison inmates to receive financial aid for college. There are 67 colleges and universities participating — ranging from Alvin Community College in Texas to Villanova University in Pennsylvania. Most are public colleges, and no for-profit college is on the list. The idea has met resistance from GOP lawmakers since last summer, when the administration announced it planned to use a provision in the Higher Education Act that allows for “experimental sites” to roll out the pilot program. In this case, the “experiment” is to test whether more people behind bars enroll in college programs after access to financial aid is expanded. The chair of the Senate's education committee, Lamar Alexander (R-Tenn.), has said the administration doesn't have the authority to give Pell grants to prisoners. But the Education Department says it does, and argues that educating prisoners is a smart investment.

Federal Committee Votes to Terminate Troubled College Accreditor: One of the nation's largest, and most criticized, accreditors of for-profit colleges was pushed a step closer to being shuttered last Thursday. In a historic move, an Education Department advisory panel voted 10-3 to recommend that the government deauthorize the Accrediting Council for Independent Colleges and Schools. The committee came to its decision after nearly 11 hours of public testimony and deliberations, much of the time spent dissecting the numerous instances in which the accreditor failed to adequately monitor its colleges. "When we see schools provide extremely poor outcomes for students 2014 or even commit fraud 2014 while maintaining accreditation, that is a black mark on the entire field," said Under Secretary of Education Ted Mitchell in the opening remarks of the advisory meeting, which began on Wednesday morning. The federal committee hearing, also known as the National Advisory Committee on Institutional Quality and Integrity, or NACIQI, took place just a few days after Education Department released a report also recommending that the government cut ties with the accreditor. The recommendations aren't binding but they are likely to carry significant weight and a clock is now ticking: A senior department official now has three months to make the ultimate decision on ACICS' fate. ACICS has faced growing scrutiny for the weak student outcomes of the colleges it accredits. A ProPublica analysis found that schools accredited by ACICS have the lowest graduation rates in the country and their graduates struggle the most to repay their student loans.

The Typical College Student Is Not Who You Think It Is - “What percentage of students in American higher education today graduated from high school and enrolled in college within a year to attend a four year institution and live on campus?” Most people guess “between forty and sixty percent,” he said, whereas “the correct answer is five percent.” There is, he argued, “a real disconnect in our understanding of who today’s students are. The influencers––the policy makers, the business leaders, the media––have a very skewed view of who today’s students are.” Clay Shirky has written persuasively on the same subject. Here’s his summary of larger trends: Of the twenty million or so students in the US, only about one in ten lives on a campus. The remaining eighteen million—the ones who don’t have the grades for Swarthmore, or tens of thousands of dollars in free cash flow, or four years free of adult responsibility—are relying on education after high school not as a voyage of self-discovery but as a way to acquire training and a certificate of hireability.Though the landscape of higher education in the U.S., spread across forty-six hundred institutions, hosts considerable variation, a few commonalities emerge: the bulk of students today are in their mid-20s or older, enrolled at a community or commuter school, and working towards a degree they will take too long to complete. One in three won’t complete, ever. Of the rest, two in three will leave in debt. The median member of this new student majority is just keeping her head above water financially. The bottom quintile is drowning.

Clinton's Plan For Millennials: Loan Forgiveness -- If Bernie Sanders and his supporters are still waiting to see whether or not Hillary Clinton is willing to move far enough left on some issues, the release of Clinton's Tech & Innovation Agenda yesterday should make everyone a little bit less concerned. According to the Clinton campaign website, Hillary's Tech & Innovation Agenda has five key parts, much of which Clinton has touched on in the past. However as Wired reports, there are a few new proposals as well, including deferring student loans interest free and loan forgiveness in general. From Wired: The presumptive Democratic nominee has touched on tech issues in an ad hoc way before, urging Silicon Valley to help fight radicalization online and calling for greater protection for on-demand workers. This is the first time, however, that Clinton—or any presidential candidate for that matter—is synthesizing these ideas into a comprehensive platform. Though many pieces of the agenda are policy prescriptions Clinton has announced in the past, including a plan to bring broadband access to every American home by 2020, the tech platform includes newer proposals as well. Her plan would, for instance, allow would-be entrepreneurs to defer their student loans interest free for up to three years as they launch their businesses. Business owners who locate in “distressed communities” or start a social enterprise also could ask the government to forgive as much as $17,500 in loans after five years in business. The goal of this part of the plan is to encourage millennials to start businesses. Entrepreneurship among young Americans has fallen drastically, and student debt is often cited as one of the greatest obstacles to starting up.

Why Hillary Clinton’s Student Debt Idea Is Smart -- One of the most interesting economic solutions proposed by Hillary Clinton recently on the campaign trail is that the financial burden of education be eased for future entrepreneurs. Under her proposal, college graduates who start a business may end up being able to get their student loans deferred, interest-free, for up to three years as they launch new ventures. Those who locate in “distressed communities” or start a social enterprise also could ask the government to forgive as much as $17,500 in loans after five years in business. The goal is not just to create jobs and encourage entrepreneurship amongst millennials, who are graduating with record debt and entering a still weaker-than-normal job market, but also to help boost enterprise creation in general, which has fallen dramatically in this country since the 1970s. This is a big deal, because it ties into the most important economic question of the day, which is why there isn’t stronger productivity growth in the economy right now (economic growth is essential productivity plus demographics). In a speech Tuesday, Fed Governor Jerome Powell touched on the issue and the stakes:“One factor that may contribute to low productivity growth is the notable decline in recent decades in measures of the dynamism of our economy. Entrepreneurs start new firms; most of them fail, but a few of them succeed, grow very rapidly, and account for significant amounts of job formation. Older firms shrink or go out of business if they fail to keep up with innovation and advances in productivity. Workers change jobs and move around the country (or the world) as their careers evolve and as companies grow and shrink. These processes can be painful and messy for both workers and firms, but they are essential to the allocation of resources to their highest, most productive uses. The high levels of innovation and fluidity of our economy have long been thought to be among the principal reasons for our high and rising living standards.”

Who got rich off the student debt crisis - Decades ago, the federal government relinquished direct control of the student loan program, opening its bank to corporations concerned with profits, not diplomas. Private equity companies and Wall Street banks seized on the flow of federal loan dollars by peddling loans that students sometimes could not afford and then collecting fees from the government to hound those students when they defaulted.Once in place, the privatized student loan industry has succeeded largely in preserving its status in Washington. Student loans are virtually the only consumer debt that cannot be discharged in bankruptcy except in the rarest of cases – one of the industry’s greatest lobbying triumphs.A t the same time, societal changes conspired to drive up the basic need for these loans: Middle-class incomes stagnated, college costs soared and states retreated from their historical investment in public universities. If states had continued to support public higher education at the rate they had in 1980, they would have invested at least an additional $500 billion in their university systems, according to an analysis by Reveal from The Center for Investigative Reporting. That’s an amount roughly equal to the outstanding student debt now held by those who enrolled in public colleges and universities. Today, there is a student debt class like no other: more than 40 million Americans bearing $1.3 trillion in debt that’s altering lives, relationships and even retirement.One of the winners in the profit spree behind this debt: the federal government. By the Department of Education’s own calculations, the government earns in some years an astounding 20 percent on each loan.

New Jersey’s pension apocalypse is looming | New York Post: If Chris Christie lands a spot in a Donald Trump White House, New Jersey residents won’t be sorry to see their governor go. Christie leaves his state in worse shape than when he found it 6½ years ago. Christie and the legislature have to finish up the state budget this week (the fiscal year starts July 1). If you take a look at Jersey’s latest $34.8 billion budget proposal, you understand why Christie spent the past year as far away from Trenton as possible. New Jersey’s in crisis — not your run-of-the-mill budget crisis where you cut spending here and raise taxes there, but a slow-motion death spiral. And this is during the eighth year of a national economic expansion, when the state should be doing well. Consider: The state’s pension fund has only socked away 37.5 percent of the money it needs to pay its current and future retirees. This ratio is “among the worst in the country,” said Standard & Poor’s in March. That’s down from 42.5 percent the previous year, and “will continue to weaken,” the analysts said. New Jersey owes $144 billion in unfunded pension and health benefits — more than four times the state budget. Understand: New Jersey is one mild economic downturn away from not being able to make payments to retirees, whether it wants to or not.

Doctors and nurses were just charged in a $900 million Medicare scam : In some cases, doctors took part in schemes to submit claims to Medicare and Medicaid for treatments that were not necessary and were never provided. In others, health care providers offered kickbacks to "patient recruiters" to help assemble beneficiary information that could be used in phony filings. One of the biggest scams involved phony billings for costly prescription drugs at a time when Medicare's drug costs are spiking. Taken together, doctors, nurses, licensed medical professionals and health care companies conspired to submit a total of $900 million in fraudulent billing in the past year to the premier federal programs providing health care to the elderly and poor, according to joint announcements on Wednesday by the Justice Department, the Department of Health and Human Services and the FBI. The latest chapter in the federal government's highly touted "National Health Care Fraud Takedown" netted 301 defendants in all, including 61 doctors, nurses and other licensed medical professionals, for their involvement in conspiracies to rip off the government. President Obama made the crackdown on Medicare and Medicaid fraud a high priority in his second term.

Blue Cross delivers major blow to health reform in Minnesota - Minnesota's largest health insurer, Blue Cross and Blue Shield of Minnesota, has decided to stop selling health plans to individuals and families in Minnesota starting next year. The insurance carrier's parent company, which goes by the same name, will continue to sell a much more limited offering on the individual market through its Blue Plus HMO. The insurer explained extraordinary financial losses drove the decision. "Based on current medical claim trends, Blue Cross is projecting a total loss of more than $500 million in the individual [health plan] segment over three years," BCBSM said in a statement. The Blues reported a loss of $265 million on insurance operations from individual market plans in 2015. The insurer said claims for medical care far exceeded premium revenue for those plans. "The individual market remains in transition and we look forward to working toward a more stable path with policy leaders here in Minnesota and at the national level," the company stated. "Shifts and changes in health plan participation and market segments have contributed to a volatile individual market, where costs and prices have been escalating at unprecedented levels." Blue Cross and Blue Shield says the change will affect about, "103,000 Minnesotans [who] have purchased Blue Cross coverage on their own, through an agent or broker, or on MNsure."

Enrollment in Obamacare down from January figures -- The number of people enrolled in coverage through President Barack Obama’s health care law this year decreased to 11.1 million by the end of March, down from 12.7 million by the January deadline. The Obama administration released new enrollment numbers Thursday that showed the number of people who signed up by January 31 exceeded those who were covered in the spring. A dropoff in enrollment has happened before, and is partially caused by people who sign up for coverage by the deadline but then lose it because they do not pay their premiums. People have also lost coverage because of issues due to citizenship or immigration paperwork. According to the Obama administration, around 20 million previously uninsured people have gained coverage through Obamacare. More people have obtained coverage in marketplaces as well as through Medicaid expansion. Around 10 million people are expected to remain enrolled in Obamacare plans by the end of 2016.

Obamacare Enrollment Drops To 11.1 Million, Government Calls It "Sign Of Success" -- By nearly all accounts, Obamacare has been a spectacular failure. Whether it's the fact that half of the cooperatives created by Obamacare had to shut down costing taxpayers roughly $1.2 billion, or that insurance premiums are exploding higher, or perhaps just having to find a new healthcare plan since the largest US health insurer decided to divorce itself from the Obamacare exchanges, it all points to disaster. When it comes to the latest Obamacare enrollment figures, the story remains the same. As The Hill reports, Obamacare enrollment dropped to about 11.1 million people at the end of March, down from the 12.7 million who signed up for coverage before the January 31 deadline. The Centers for Medicare and Medicaid Services (CMS) said that a dropoff was expected, and has occurred in previous years as well, given that some people who sign up do not pay their premiums - we wonder why that is. The administration says it projects that about 10 million people will remain signed up by the end of the year. Said otherwise, they government is planning on another 1.1 million dropping out of Obamacare before the end of the year. Kevin Counihan, the CEO of the Obamacare marketplaces, said the fact that about a million more people are signed up than at a similar point last year (11.1 million compared to 10.2 million) is a sign of success. We suspect Kevin is conveniently forgetting the fact that the CBO had projected that 2016 enrollment would be as high as 21 million people - but perhaps missing projections by nearly half is a sign of success in the government's eyes.

ACLU Sues Federal Government for Granting Millions of Dollars to Religious Groups That Deny Young Women Access to Medical Care - The American Civil Liberties Union, the ACLU of Northern California, and the ACLU Foundation of Southern California today filed a lawsuit against the federal government for awarding millions of dollars annually to organizations that fail to provide crucial medical care to unaccompanied immigrant minors. The government authorizes some of these organizations to refuse — on religious grounds — to follow the law that requires access to contraception and abortion, even in cases of rape. “When a teen has endured unthinkable tragedy — violence, rape, a terrifying journey to an unfamiliar place — and she arrives here afraid and alone, the last thing we should do is deny her the care she needs,” said ACLU Senior Staff Attorney Brigitte Amiri. “Our taxpayer dollars should not be used to authorize organizations to violate the law and impose their religious beliefs on these young women and deny them care they desperately need.” The federal government is legally required to provide unaccompanied immigrant minors — children and teenagers who come to the U.S. on their own — with basic necessities, such as housing, food, and access to emergency and routine medical care, including family planning services and abortion. Reports indicate that between 60 and 80 percent of women and girls who cross the border are sexually assaulted. "The federal government can't abdicate its legal obligation to protect and provide reproductive health care to these vulnerable young women. Allowing religious organization to dictate the type of care that these teens, who often have fled unimaginable violence, receive is not only unlawful but also cruel," said ACLU of Southern California LGBTQ, Gender, and Reproductive Justice Project Director Melissa Goodman.

Healthcare workers prioritize helping people over information security (disaster ensues) - In Workarounds to Computer Access in Healthcare Organizations: You Want My Password or a Dead Patient?, security researchers from Penn, Dartmouth and USC conducted an excellent piece of ethnographic research on health workers, shadowing them as they moved through their work environments, blithely ignoring, circumventing and sabotaging the information security measures imposed by their IT departments, because in so doing, they were saving lives. For example, passwords were so commonly written on sticky notes and placed on terminals that they formed "stalactites," and in some hospitals, all workers shared a single password, which was written on a piece of tape stuck to the device -- to solve this, one vendor offers stickers "to write your username and password and post on your computer monitor." Health workers were also skilled at defeating the proximity sensors that logged them out of their terminals when they got up from their workstations (these automated logouts are vital to ensuring that clinicians check that the record they're looking at is for the patient they're treating, preventing potentially fatal mixups): for example, by styrofoam cups over the sensors or assigning the most junior staffer to press the spacebar at timed intervals. These workarounds were driven by clinicians' need to get their jobs done and by IT's failure to understand what that entailed. For example, IT's imposition of password rotation schedules meant that no one knew what their passwords were from moment to moment, forcing them to write them down and share them (in some cases, IT might have had this policy set by vendors or regulators/insurers). Aggressive timeouts on terminals meant that clinicians spent an undue amount of time logging in, making it impossible to get their work done.

Hacker Advertises Slew of Alleged Healthcare Organization Records - A hacker is advertising hundreds of thousands of alleged records from healthcare organizations on a dark web marketplace, including social security and insurance policy numbers. The data could be used for anything from getting lines of credit to opening bank accounts to carrying out loan fraud and much more, the hacker selling the data, who goes by the handle "thedarkoverlord," told Motherboard. News site Deep Dot Web first reported the news on Saturday. The breaches supposedly come from three different healthcare organizations: one in Farmington, Missouri with 48,000 records; another in Atlanta, Georgia with 397,000 entries, and the third in the Central/Midwest US with 210,000 records. Thedarkoverlord has decided to not name the organizations, as he has threatened each with a ransom demand. “A modest amount compared to the damage that will be caused to the organizations when I decide to publicly leak the victims,” thedarkoverlord said, although he claims to have already sold $100,000 worth of records from the Georgia dump. (The hacker declined to provide his or her gender, so for ease of reading Motherboard will just refer to the hacker as “him.”) “Someone wanted to buy all the Blue Cross Blue Shield Insurance records specifically,” he said.

New Haven Declares Public Health Emergency After "Never Before Seen" Heroin Overdose Epidemic - Last week we reported that Heroin use in the United States has reached a 20 year high, and no sooner did we pen that did we learn that New Haven, Connecticut has declared a public health emergency due to a string of heroin overdoses. Officials said that New Haven has experienced at least 15 overdoses since Thursday afternoon and possibly up to 22 NBC reports. The overdoses across the city are linked to a batch of heroin mixed with fentanyl (which is 50 times more potent than heroin) and the issue has led to the city declaring a public health emergency."We're looking at a public health emergency affecting the streets of New Haven" Deputy Director of Emergency Management Rick Fontana said. To make matters worse, the sheer number of overdoses has strained the city's supply of the drug used to reverse the effects of an overdose. More from the New Haven Register Assistant Fire Chief Matthew Marcarelli said the department has been really busy since 3:30 p.m. with 15 patients exhibiting signs of heroin and opiate overdoses. “We’ve had quite a hectic time,” he said. “I don’t recall an incident where it’s been like this.”The sheer number of overdoses has strained the city’s supply of naloxone, also known as Narcan, which is an overdose reversal medication that is administered to people suspected of overdosing. The drug works instantaneously. Fontana said the city has a “critical” shortage of the medication, which can be administered by first responders. Marcarelli said officials had enough resources to address the calls, but he hoped the department’s supply would get them through the night. The overdose reversal drug comes in 2-milligram doses, but some people have required more than one dose, he said. “From what I’m told, some patients received as many as four doses,”

Researchers have found an alarming new side effect from eating fast food - Critics of the fast-food industry have long warned about the perils of our addiction to processed food. Big Macs and Whoppers might taste good, but put too many of them in your body and it will expand as Violet Beauregard's did in Willy Wonka & the Chocolate Factory (although maybe not quite as fast). The evidence is decades in the making. The rise of processed food, after all, has coincided with an alarming growth in the size of our collective gut. But there might be some new powerful ammunition for those who could do without the food the fast-food industry serves. Researchers at George Washington University have linked fast-food consumption to the presence of potentially harmful chemicals, a connection they argue could have "great public health significance." Specifically, the team found that people who eat fast food tend to have significantly higher levels of certain phthalates, which are commonly used in consumer products such as soap and makeup to make them less brittle but have been linked to a number of adverse health outcomes, including higher rates of infertility,especially among males.The danger, the researchers believe, isn't necessarily a result of the food itself, but rather the process by which the food is prepared. The findings were published in Environmental Health Perspectives, a journal funded by the National Institutes of Health. "We're not trying to create paranoia or anxiety, but I do think our findings are alarming," said one of the study's authors, Ami Zota, an assistant professor of environmental and occupational health at George Washington University. "It's not every day that you conduct a study where the results are this strong."

Contagious cancer cells are 'widespread phenomenon' in sea, scientists say -- Contagious cancer cells are spreading between different animals and even different species in the sea, according to new research which raises the prospect of the disease becoming infectious in humans. Previously it was thought that catching cancer from another animal was extremely rare, although last year cancer cells from a tapeworm infected an Aids patient with a severely compromised immune system. Sexually transmitted tumours are also known to affect dogs, and the Tasmanian devil population has been devastated by a contagious facial cancer spread by biting. However the new study, published in the journal Nature, suggests that infectious cancer is common among three different kinds of shellfish. There is no suggestion that humans would be at risk as our immune system would attack any alien tissue that entered the body. Researchers found mussels, cockles and clams, collected off the coasts of Canada and Spain, that had been infected with tumours which originated in another individual. “Our results indicate that transmission of contagious cancer cells is a widespread phenomenon in the marine environment, with multiple independent lineages developing in multiple species,” the paper said. “Cases of transmissible cancer appear to outnumber spontaneous disease, at least in the species investigated so far.”The researchers added that the cancers usually spread between animals of the same species, but they had found "one example of cross-species transmission". "These transmissible cancers constitute a distinct class of infectious agent and show the remarkable ability of tumours to acquire new phenotypes [genetic types] that promote their own survival and propagation," the paper said.

Global warming to expose more people to Zika-spreading mosquito Aedes aegypti --My colleagues and I recently completed a study examining how projected changes in climate and human population may increase global exposure to the mosquito that spreads these viruses: Aedes aegypti. We found that both climate change and human population change will play a part in driving future human exposure to Aedes aegypti globally. In the United States, specifically, warming temperatures from climate change mean that this disease-spreading mosquito will be increasingly abundant in the southern and eastern U.S. Aedes aegypti transmits the viruses that cause Zika, dengue, chikungunya and yellow fever. An ongoing Zika pandemic in Latin America and the Caribbean has been linked to birth defects in newborns and neurological disorders in adults, initiating a massive public health response and garnering extensive media coverage. The other three viruses are important threats as well: dengue viruses infect about 400 million people each year, chikungunya has been linked to chronic health problems such as arthritis and a new yellow fever outbreak in Angola has stoked fears of imminent vaccine shortages. Aedes aegypti is a particularly effective virus spreader because of its dependence on humans. While many mosquitoes prefer natural areas for breeding, such as wetlands, Aedes aegypti exploits artificial water-filled containers such as tires, buckets, barrels and stray trash for its aquatic life stages (egg, larvae and pupae). Such containers are often found in backyards, meaning that when adult mosquitoes finally emerge, they are found in and near homes. And, while other mosquito species may be less picky about whom they bite, Aedes aegypti has a preference for humans.

Zika virus a concern for poor urban areas along Gulf Coast (AP) — The poorest parts of Houston remind Dr. Peter Hotez of some of the neighborhoods in Latin America hardest hit by Zika. On a hot, humid day this month, Hotez pointed at one pile that included old tires and a smashed-in television with water pooling inside. It was a textbook habitat for the mosquitoes that carry and transmit the Zika virus, and one example of the challenge facing public health officials. Hotez and other tropical disease specialists are most concerned about impoverished urban areas along the Gulf Coast, where the numbers of the mosquito that spreads Zika are expected to spike. Texas already has dealt with dengue fever, transmitted by the same mosquito. Zika causes only a mild and brief illness, at worst, in most people. But it can cause fetal death and severe brain defects in the children of women infected during pregnancy. So far, Texas officials have reported 48 people infected with Zika, all associated with travel. In one case, the virus was sexually transmitted by someone who had been infected abroad. Public health officials have spent months preparing for what they are certain will be at least some locally transmitted cases. “It’s not a matter of if, it’s a matter of when,” Florida and other states in the South where the Aedes aegypti mosquito is present also are taking steps to prepare. In Florida, for example, Gov. Rick Scott used his emergency powers last week to authorize spending up to $26.2 million for Zika. His action comes as Congress remains stalemated on President Barack Obama’s $1.9 billion proposal to fight the virus. A scaled-back $1.1 billion Republican-drafted measure was blocked in the Senate on Tuesday by Democrats opposed to its denial of new funding for Planned Parenthood clinics in Puerto Rico, where there already are more than 1,800 locally acquired cases, and to easing rules on pesticide spraying.

New study casts doubts on Zika being the cause of microcephaly: In April this year, the CDC took a bold step in saying "There is no longer any doubt that Zika causes microcephaly." But a new study asks, "If this is so, where are the missing microcephaly cases in other nations hard hit by the virus?" And here everyone thought the issue with what caused the rise in birth defects in women infected with the Zika virus was settled. We had scientists from Brazil and later, the Centers for Disease Control and Prevention (CDC) telling us they had confirmed Zika as the culprit behind the microcephaly cases in Brazil. But Brazil's microcephaly cases continues to raise questions with a number of doctors and researchers, and it appears that they have good reason to be curious. With the advent of the Zika virus in the northeastern part of the country, there were eventually 1,500 confirmed cases where babies were born with skull deformities, a high number that was attributed to the Zika virus. But a recent study carried out by researchers at the New England Complex Systems Institute (NECSI) on the incidence of microcephaly in pregnant women infected with the Zika virus in Colombia raises some serious questions, and the biggest one is: "Where are the missing cases of microcephaly in Colombia and other countries affected by the Zika outbreak?" The study, published in the highly respected New England Journal of Medicine on June 15, used Zika surveillance data from August 9, 2015, when the virus was first identified in Colombia to April 2, 2016. Of the nearly 12,000 pregnant women with clinical symptoms of Zika infections up until March 28, 2016, "there were no cases of microcephaly reported as of May 2, 2016."

Dems Refuse to Back GOP Zika Bill that Attacks Women, Vets, Obamacare, and Clean Water - Senate Republicans are being accused of politicizing a major public health crisis on Tuesday after a bill to fund Zika virus research failed because the GOP packed the legislation with "extreme and unnecessary partisan priorities." "In a 52-48 vote, the Senate fell eight votes short of moving past a procedural hurdle against the House-Senate conference report on a military and veterans spending bill, which includes $1.1 billion to fund the Zika virus research," The Hillreports. Sen. Joe Donnelly (D-Ind.) reportedly broke with his party and voted for the deal while GOP Sens. James Lankford (R-Okla.), Mike Lee (R-Utah), and Majority Leader Mitch McConnell (R-Ky.) voted against. As The Hill notes, "McConnell's 'no' vote allows him to bring the measure back up for another vote." Sen. Elizabeth Warren (D-Mass.) took to social media to express her disgust for the legislation and lawmakers behind it. My blood is boiling over the pathetic, dishonest & malicious #Zika funding bill that @SenateMajLdr McConnell & the GOP just tried to pass.— Elizabeth Warren According to Warren, not only does the bill provide $800 million less than the White House had requested—stealing money from both the Ebola response fund and the Affordable Care Act healthcare exchanges—but it also "blocks Planned Parenthood from receiving birth control grant money that would help poor women with Zika avoid having deformed babies," rolls back Clean Water Act requirements designed to keep pesticides out of drinking water, and slashes U.S. Department of Veterans Affairs funding by $500 million.

As the War on Weed Winds Down, Will Monsanto Be the Big Winner? -- Ellen Brown - The war on cannabis that began in the 1930s seems to be coming to an end. Research shows that this natural plant, rather than posing a deadly danger to health, has a wide range of therapeutic benefits. But skeptics question the sudden push for legalization, which is largely funded by wealthy investors linked to Big Ag and Big Pharma. . A major barrier to broader legalization has been the federal law under which all cannabis – even the very useful form known as industrial hemp – is classed as a Schedule I controlled substance that cannot legally be grown in the US. But that classification could change soon. In a letter sent to federal lawmakers in April, the US Drug Enforcement Administration said it plans to release a decision on rescheduling marijuana in the first half of 2016. The presidential candidates are generally in favor of relaxing the law. In November 2015, Senator Bernie Sanders introduced a bill that would repeal all federal penalties for possessing and growing the plant, allowing states to establish their own marijuana laws. Hillary Clinton would not go that far but would drop cannabis from a Schedule I drug (a deadly dangerous drug with no medical use and high potential for abuse) to Schedule II (a deadly dangerous drug with medical use and high potential for abuse). Republican candidate Donald Trump says we are losing badly in the war on drugs, and that to win that war all drugs need to be legalized. The pharmaceutical industry has both much to gain and much to lose from legalization of the cannabis plant in its various natural forms. Patented pharmaceuticals have succeeded in monopolizing the drug market globally. What that industry does not want is to be competing with a natural plant that anyone can grow in his backyard, which actually works better than very expensive pharmaceuticals without side effects.

Senate Ag Leaders Lobby Hard to Pass DARK Act Compromise to Preempt Vermont GMO Law -- Despite Vermont’s historic GMO labeling bill coming into effect June 1, Senate Agriculture Committee chairman Pat Roberts (R-Kan.) and ranking member Debbie Stabenow (D-Mich.) are vigorously lobbying to get their industry-approved GMO labeling deal passed before Congress’s summer break. According to POLITICO’s Morning Agriculture blog, the Senate Ag leaders are using “every part of the lobbying playbook,” with “letters being sent, staffs briefed, reports and FDA assessments flaunted, and farmers and consumers are being encouraged to inundate lawmakers with phone calls.” Roberts has been reportedly distributing a flier touting that the bill will nullify the “dangerous” Vermont law and stop other states from passing similar legislation. Even though Vermont’s mandate comes into effect Friday, the Senators’s bill still has a small window of passage as Vermont’s attorney general will not start forcing producers to label their food products containing genetically engineered ingredients until the start of 2017. A confident Stabenow told POLITICO that enough votes will be secured for the deal to move forward, while Roberts said, “We had 46 [Republicans] last time, and we’re hoping to get a few more.” Last March, the Senate voted down Roberts’s previous bill that would have prohibited states from requiring genetically modified food labels. The bill required 60 votes for passage but failed 48-49. Roberts said his latest GMO bill will be the first order of business next week and Senate Majority Leader Mitch McConnell will set up a cloture vote, according to this tweet from Agripulse senior editor Philip Brasher.

Mother-of-Three Sues Monsanto Claiming Roundup Caused Her Cancer -- Three years ago, Mendoza was diagnosed with stage four non-Hodgkin’s Lymphoma when she was only in her mid-thirties. When asked how she felt about the worrisome diagnosis, she recalled to CBS News, “[I felt] that I ­­was going to die. I had only like a few days.” The mother of three explained to CBS that she would walk around her one-acre property with a backpack sprayer containing the controversial weedkiller and believes the product led to her illness. After a five-month battle with the disease and intense chemotherapy, Mendoza’s cancer is in remission. But she now finds herself facing another giant: Monsanto. Robin Greenwald, the head of environmental protection at personal injury law firm Weitz & Luxenberg, represents Mendoza and has helped file nine other cases against the St. Louis-based corporation over their blockbuster product. Greenwald told EcoWatch that all of these cases are focused on exposure to Roundup and diagnosis of non-Hodgkin’s Lymphoma, and the IARC has “issued a strong association” between glyphophate and the cancer. Monsanto has sought dismissal of Mendoza’s case as well as other similar cases but the company’s motions have consistently been denied. Greenwald says people from around the country have been coming to her about Roundup lawsuits and have raised similar allegations that Monsanto has not adequately warned about Roundup’s link to cancer. She said these people come in three categories: farmers, and at least one nursery worker, who have been exposed to the compound through agricultural work; people like Mendoza who regularly apply Roundup to their own lawns and property; and landscapers who go from town to town and get exposed to the product.

Glyphosate Given Last-Minute Approval Despite Failure to Secure Majority Support - As expected, the European Commission has extended the license for glyphosate for 18 months. Health Commissioner Vytenis Andriukaitis announced the last-minute re-licensing on June 28 despite failing three times in a row to secure a majority decision from the European Union’s member states. The EU’s current approval of glyphosate had been set to expire on Thursday but due to the member state gridlock, the EU’s executive body had the final say on whether or not the controversial weedkiller remained on Europe’s shelves. Had glyphosate’s license been allowed to expire, manufacturers would have been given six months to phase out products containing the chemical, such as Monsanto’s Roundup and other herbicides. “The commission will follow our legal obligation. We know very well that we have a deadline of June 30. We will adopt an extension for glyphosate of 18 months,” Andriukaitis said at a news conference. Europe’s opinion of the widely used pesticide has been sharply divided ever since March 2015 when the World Health Organization’s International Agency for Research on Cancer classified glyphosate as a probable carcinogen. To complicate matters, other regulatory agencies such as the European Food Safety Authority, declared glyphosate as safe in November. Andriukaitis noted that the 18-month extension will allow the European Chemicals Agency to further assess the product’s safety. However, the fact that the commission originally proposed to extend glyphosate for another 15 years but has now whittled it down to a temporary approval highlights the chemical’s uncertain fate on the continent.

Cotton Crisis - Pakistan’s economy is in grave trouble. According to the Pakistan Economic Survey 2015-16, it failed to meet the growth target of 5.5pc in FY2016. GDP grew by 4.7 pc. This was mainly due to the ‘major setback’ (to use the finance minister’s words) in agriculture. At the heart of the crisis was a massive decline of 27.8pc in cotton production. It should be remembered that cotton is the mainstay of our agriculture and textile industry. The cotton crisis has emerged as a very controversial issue. Well-informed farmers attribute this disaster to the widespread use of genetically modified seeds that were formally introduced in the country in 2010 but were being smuggled since 2005. Now BT cotton (a genetically modified variety) is grown in 88pc of the cotton-cultivated area. Genetically modified organisms (GMOs) have been challenged all over the world as some giant seed multinationals have grown phenomenally thanks to their aggressive marketing. If unchecked, they could dominate global agriculture. GM seeds will undermine biodiversity as the manufacturers ensure their monopoly in the seed sector. Being vulnerable to pest attacks, GM crops need pesticides in large quantities that poor farmers cannot afford. It is no coincidence that the manufacturers of these seeds also produce pesticides which account for a big chunk of their revenues.. Cotton production has not increased as promised since BT cotton was introduced. The decline is not fully reflected in the data released by the government because it has changed the measure used to determine the output, which is counted in the number of bales. Previously, each cotton bale weighed 176 kilogrammes. Since 2011 it has been reduced to 150kg. Using the old measure we know that cotton production had hit a record figure of 14.6 million bales in 2004. That figure has never been reached again and last year it was less than 9m bales (by the old measure).

Coal-tar based sealcoats on driveways, parking lots far more toxic than suspected -- The pavement sealcoat products used widely around the nation on thousands of asphalt driveways and parking lots are significantly more toxic and mutagenic than previously suspected, according to a new paper published this week by researchers from Oregon State University. Of particular concern are the sealcoat products based on use of coal tar emulsions, experts say. Studies done with zebrafish - an animal model that closely resembles human reaction to toxic chemicals - showed developmental toxicity to embryos. Products based on coal tar are most commonly used east of the U.S. continental divide, and those based on asphalt most common west of the divide. The primary concern in sealcoats are polycyclic aromatic hydrocarbons, or PAHs, which are common products of any type of combustion, and have been shown to be toxic to birds, fish, amphibians, plants and mammals, including humans. There are many different types of PAHs. This study was able to examine the presence and biologic activity of a much greater number of them in sealcoats than has been done in any previous research. The OSU program studying PAHs is one of the most advanced of its type in the world, and can identify and analyze more than 150 types of PAH compounds. It found some PAHs in coal tar sealcoats that were 30 times more toxic than one of the most common PAH compounds that was studied previously in these products by the U.S. Geological Survey. The OSU study also showed that new PAH compounds found in coal tar sealcoats had a carcinogenic risk that was 4 percent to 40 percent higher than any study had previously showed.

Trash by the numbers: Startling statistics about US garbage - The great thing about the modern sanitation system is that we don't have to live with our garbage. The bad thing thing about the modern sanitation system is that ... we don't have to live with our garbage. In my rebellious youth I used to (half-jokingly) assert that littering should be encouraged so that we could all see just how much garbage we make – if we were forced to live with it we'd surely make less, right? But we have good sanitation and it means that we can make more and more and more and more garbage, and it all gets magically taken away to leave room for us to make more. I'm pretty sure we all understand that there's a whole lot of trash going on around here. But the numbers behind it really bring it home. To that end, SaveOnEnergy compiled a report that looks at landfills and the numbers around them. Here are some of the eye-opening statistics.

4.4 pounds: The amount of trash generated daily, on average, by every American. Packed in cubed feet it would be the height of the Leaning Tower of Pisa.

254 million tons: The amount of trash that Americans generate in a year.

22 billion: Plastic bottles thrown out yearly.

12 feet: The height of a wall from Los Angeles to New York City that could be made from tossed office paper every year.

300: Laps around the equator that could be made in paper and plastic cups, forks, and spoons disposed of annually.

2,000+: The number of active landfills in the country.

1000s: The number of inactive landfills in the country.

Air pollution to kill millions more without energy policy change: IEA | Reuters: Premature deaths from air pollution will continue to rise to 2040 unless changes are made to the way the world uses and produces energy, the International Energy Agency said on Monday. Around 6.5 million deaths globally are attributed each year to poor air quality inside and outside, making it the world's fourth-largest threat to human health, behind high blood pressure, dietary risks and smoking. Harmful pollutants such as particulate matter - which can contain acids, metals, soil and dust particles - sulfur oxides and nitrogen oxides, are responsible for the most widespread effects of air pollution. Tiny particulate matter can cause lung cancer, strokes and heart disease over the long term, as well as trigger symptoms such as heart attacks that kill more rapidly. The release of these pollutants is mainly due to the unregulated or inefficient production and use of energy, the IEA said in a special report on energy and air pollution. Without action, annual premature deaths attributable to outdoor air pollution will increase to 4.5 million in 2040 from around 3 million currently. Premature deaths due to household air pollution however, should fall to 2.9 million from 3.5 million. Asia will account for almost 90 percent of the rise in deaths. Even though global emissions are forecast to decline overall to 2040, existing and planned energy policies will not be enough to improve air quality, the report said.

Air Pollution Kills Millions Each Year, But It Doesn’t Have To A new report from the International Energy Agency paints both a dreary and optimistic picture of the dangers of air pollution. On the one hand, air pollution is linked to an estimated 6.5 million deaths per year — a number that is expected to rise in coming decades. On the other hand, even small investments in technology could help curb the number of annual deaths attributed to air pollution. The IEA report looks at two main types of pollution: outdoor pollution, which kills an estimated 3 million, and indoor pollution, which kills an estimated 3.5 million. Outdoor pollution largely comes from things like dirty, fuel-inefficient cars, factories, and power plants (the energy sector is still responsible for the majority of air pollution). Indoor pollution comes from things like wood, coal, dung, or other types of solid fuel that people use for cooking or lighting indoors — when burned, those solid fuels give off particulate pollution that can cause respiratory diseases, cancer, and death. Overall, air pollution is the fourth greatest risk factor for human health, behind high blood pressure, dietary risks, and smoking, and more than 80 percent of the world’s urban population lives in areas where the air pollution exceeds the guidelines set by the World Health Organization. According to the report, however, even small increases in technology or energy efficiency could prevent millions of these deaths. The report outlines three primary ways for reducing air pollution: setting ambitious, long-term air quality goals, creating a package of clean air policies for the energy sector, and ensuring effective monitoring and evaluation of air pollution.

High lead levels force workers in Congress building to drink bottled water: Concerns about dangerous lead in drinking water have reached Congress – quite literally. It’s been discovered that a key congressional office building has high lead levels in its water supply, with workers being provided with bottled water to consume instead. A recent routine test found the elevated lead levels in the Cannon House Office Building in Washington DC, according to an email sent out by William Weidemeyer, the House office buildings superintendent. According to Politico, Weidemeyer’s memo to lawmakers and their staff states that the lead levels are “slightly above the EPA standard”. “Although the cause of the increase remains under investigation, in an abundance of caution all drinking water sources and office-provided water filtration units in the building will be turned off beginning at 10pm Tuesday, June 28, 2016,” the email reads. The five-story Cannon House Office Building has provided office space for members of Congress since 1908. The building, which is connected to the Capitol via a tunnel, is undergoing a $750m renovation, which started in January last year. Washington DC has had previous brushes with lead-in-water problems, with the city exposed as having lax testing practices 10 years ago. Subsequent reporting, including by the Guardian, has shown that lead levels in dozens of US cities have been downplayed by testing that can obscure the true amount of contamination.

The New Water Czars — Thirty miles south of downtown Phoenix, where you might expect to find desert saguaro and cholla, emerald green farm fields blur into the horizon: perfectly flat rectangles laid out one after the other, separated by canals and irrigation ditches into a gigantic crossword puzzle-like grid. Here, on the 375,000-acre Gila River Indian Community, Pima and Maricopa Indians tend fields of alfalfa, cotton, wheat and vegetables, groves of citrus and olive trees, and even giant ponds full of tilapia and shrimp. The community's 16,000-acre farm, and a handful of smaller farms operated by tribal members, are sustained by more than 200,000 acre-feet of water, funneled every year from the Gila, Salt and Colorado rivers, or pumped from underground aquifers. (An acre-foot is one year’s worth of water for a family of four.) Already, the Gila River Indian Community is one of the largest agricultural operations in southern Arizona. But a deal pending before Congress would more than triple its water share, and turn the tribes’ land into what some tribal leaders hope will be the "breadbasket of Arizona." The landmark settlement would provide this community of fewer than 20,000 with more than 650,000 acre-feet of water annually. That’s enough to serve the residential needs of almost 3 million people, nearly the entire Phoenix metropolitan area.

Drought impact on Sierra forests starting to show in Nevada -- U.S. Forest Service officials say the number of trees in Sierra Nevada forests killed by drought and bark beetles now is in the millions. And Nevada forestry’s Natural Resources Manager says the damage is starting to show on this side of the Sierra as well. “All you’ve got to do is stand back and take a look up the hillside,” said John Christopherson. “You see dead trees and dying trees.” According to the forest service, an estimated 66 million trees have died over the past half-dozen years in California’s southern Sierra. Further, the U.S. Department of Agriculture estimates roughly 28 million trees California were dead or dying in 2015 as a result of the ongoing drought — of that, 93,167 were trees in the Tahoe National Forest, while 35,038 were within the Lake Tahoe Basin, according to previous reports. Christopherson said the worst hit areas on Nevada’s side of the Sierra are the forests lower down the slopes. When there isn’t enough moisture, he said the trees become weakened and susceptible to attack by bark beetles. Simply put, he said, “there are too many trees vying for a limited amount of moisture.” “Driving into work every day, you notice up on the hillside a few more going out,” he said. “They turn yellow, then red, then brown. But it shouldn’t come as a surprise when you have however many successive years of below normal moisture.” That sets the Sierra up for what could become one of the worst wildfire seasons ever.

Millions of caterpillars are decimating the trees in New England - When the European gypsy moth hatches, it is born as a furry little caterpillar. They emerge from their eggs in the spring and proceed to feed mercilessly on the surrounding foliage. Tree leaves and coniferous needles are the primary target of this tiny scourge, and if you happen to live in the middle of an infestation, you may feel as if the plague has descended on your own home. This is what’s happening in New England. Caterpillars are everywhere, trees are decimated, and the skyline looks like the middle of winter. “The tree damage is found in pockets that consist of just a few trees in a yard here and there to several acres completely defoliated,” Phil Burt, a meteorologist in Massachusetts, told The Washington Post. Burt said that, at least in Brewster, Mass., the caterpillars are “probably at their worst since the early to mid-1980s.” The European gypsy moth was inadvertently brought to the United States near Boston during the late 1800s, according to the U.S. Department of Agriculture. Since then, the moth’s range has expanded to include the entire Northeast south to North Carolina, and as far west as Minnesota and Iowa. The gypsy moth females lay a mass of eggs on vertical surfaces — usually tree trunks — in the late summer. The eggs ride out the winter and eventually hatch in May. The caterpillars feed on leaves, molt into adult moths, and then start the reproductive cycle all over again. Usually, this process comes and goes with few complications. But the weather caused this year’s hatching to become more than overwhelming.

California's Wildfires Just Tripled in Size - When it comes to forest fires, California can't seem to catch a break. Last year was a hellacious one for uncontrolled burns, and 2016 is looking just as bad. In the past week, the number of acres scorched by wildfire has tripled from around 32,000 to more than 98,000, according to the state's Department of Forestry and Fire Protection. The number of fires the department, known simply as Cal Fire, has responded to is slightly above the seasonal five year average. But it's early in the fire season. Local, state, and federal firefighters have already dealt with more than 2,400 wildfires so far this season, say's Daniel Berlant, Cal Fire’s information officer. Last week, Gov. Jerry Brown declared a state of emergency for Southern California’s Kern County, where the largest of those conflagrations still rages; the Erskine fire covers more than 45,000 acres and is only 40 percent contained. It has killed two people so far, destroying 150 homes and damaging 75. . In recent years, drought conditions have fueled fires across the state. El Niño conditions brought badly needed rain this past winter, but the wetter conditions also begat a bumper crop of grasses that are now reduced to dry fuel. “The rain is always a blessing and a curse,” Berlant says. In addition, thanks to prolonged drought and hungry bark beetles, California has more than 66 million dead trees, the US Forest Service estimates—more than double last year's count. In short, the state is a tinderbox.

Scientists find 'water windfall' beneath California's Central Valley: California's drought-stricken Central Valley harbors three times more groundwater than previously estimated, Stanford scientists have found. Accessing this water in an economically feasible way and safeguarding it from possible contamination from oil and gas activities, however, will be challenging."It's not often that you find a 'water windfall,' but we just did," said study co-author Robert Jackson, the Michelle and Kevin Douglas Provostial Professor at Stanford. "There's far more fresh water and usable water than we expected." The research, published in the journal Proceedings of the National Academy of Sciences the week of June 27, highlights the need to better characterize and protect deep groundwater aquifers not only in California but in other parched regions as well. Previous estimates of groundwater in California are based on data that are decades old and only extend to a maximum depth of 1,000 feet, and often less. Until now, little was known about the amount and quality of water in deeper aquifers. "Water a thousand feet down used to be too expensive to use," said Jackson Times are different now. California is in the midst of its fifth year of severe drought, and in 2014 Gov. Jerry Brown declared a drought emergency in the state. To meet its surface water needs, the state is increasingly turning to groundwater supplies. In the new study, Jackson and Kang used data from 938 oil and gas pools and more than 35,000 oil and gas wells to characterize both shallow and deep groundwater sources in eight California counties. The researchers concluded that when deeper sources of groundwater are factored in, the amount of usable groundwater in the Central Valley increases to 2,700 cubic kilometers - or almost triple the state's current estimates.

Is California sitting on the solution to its drought? - CNN.com: Californians: A solution to the drought may be under your feet, according to a study from Stanford scientists. Thousands of feet beneath the surface of the state's Central Valley, one of the world's biggest agricultural hubs, there may be up to 2,700 cubic kilometers of usable groundwater -- nearly three times more than the amount previously thought. "It's not often that you find a 'water windfall,' but we just did," said study co-author Robert Jackson, a professor at Stanford. "There's far more fresh water and usable water than we expected." Another one of the study's authors said the findings would be relevant in other places where there are water shortages -- including Texas, China and Australia. The discovery is not a panacea, however. Drilling for water so deep is expensive and can be hazardous. It may add to the gradual sinking of the land already taking place in the Central Valley, according to a statement from Stanford. "Groundwater pumping from shallow aquifers has already caused some regions to drop by tens of feet," the researchers said. Those deep groundwater resources are also vulnerable to contamination from oil and gas -- oil and gas drilling occurs in up to 30% of the sites where deep groundwater is located -- as well as from other human activities, like hydraulic fracturing, according to the study. Still, Kang and Jackson believe that just because fracking has occurred, it doesn't mean the water has been ruined. "What we are saying is that no one is monitoring deep aquifers," Kang said. "No one's following them through time to see how and if the water quality is changing."

Alpine soils storing up to a third less carbon as summers warm: The top metre of the world’s ssoils contains three times as much carbon as the entire atmosphere. This means that losing carbon from the soil can quicken the pace of human-caused climate warming. A new paper, published today in Nature Geoscience, finds this is already happening in the forests of the German Alps. Soils there are losing carbon as summer temperatures rise, the researchers say. In the last three decades, soil carbon across the German Alps has decreased by an average of 14% – and by as much as 32% for certain types of soils. The findings might be a sign of how soils could amplify warming in future, other scientists say. Soils play a crucial role in the global carbon cycle. The figure below, from a News & Views article that accompanies the paper, illustrates how carbon is taken up and released by soils. Plants absorb CO2 from the atmosphere through photosynthesis, and transfer carbon into the ground when dead roots and leaves decompose in the soil. Here, carbon is “immobilised” for anything from a week to thousands of years. Eventually, the carbon is broken down completely, or “mineralized”, releasing CO2 back into the atmosphere

Lawsuit Filed Against 3M for Dumping Toxic Chemicals Into the Tennessee River - With a major American river poisoned by toxic chemicals dumped into it by one of the nation’s largest corporations, Tennessee Riverkeeper has filed a federal lawsuit against 3M Company and other defendants under the U.S. Resource Conservation and Recovery Act (RCRA). The suit alleges the defendants’ contamination of the Tennessee River in and near Decatur, Alabama with perfluorooctanoic acid (PFOA), perfluorooctane sulfonate (PFOS) and related chemicals has created an “imminent and substantial endangerment to health and the environment.”The toxins—components or byproducts of 3M’s manufacture of its profitable lines of “non-stick” products like Scotchgard and Stainmaster—have polluted the Tennessee River’s Wheeler Reservoir, a popular recreation destination and home to various important wildlife species and ecosystems. The Tennessee Riverkeeper’s RCRA suit seeks to compel the immediate and thorough clean-up of the contaminants.As even minimal exposure to PFOS and PFOA is linked to a variety of lethal health hazards, there exist virtually no safe levels of the chemicals in the environment. Research strongly indicates PFOA and PFOS are potent carcinogens and they have also been tied to birth defects and adverse effects on childhood development, significantly decreased immune system function, liver tissue damage and a host of other serious health problems. Consequently, in a May 2016, the U.S. Environmental Protection Agency (EPA) announced Drinking Water Health Advisories for PFOA and PFOS of only 0.07 parts per billion.However, PFOA and PFOS levels in the Tennessee River near the 3M site are, respectively, more than 70,000 and 50,000 times higher than the EPA’s safety advisory.

Bird’s Eye View of Catastrophic Toxic Mine-Waste Spill in Brazil -On Nov. 5, 2015, a mine-waste dam collapsed at an enormous iron mine in southeastern Brazil. The wave of toxic waste was at least twice the volume of the Johnstown Flood and wiped out buildings and bridges more than 40 miles downstream. Using post-spill satellite imagery and Google Earth, we have produced a bird’s-eye view of the devastation wrought by the deluge of arsenic-laced sludge. During the spill, we reported extensively on the immediate aftermath visible on satellite imagery, the remaining threat of a possible second dam failure (which thankfully did not materialize) and by looking back in time with historical satellite imagery, documented the increase of waste in the impoundment behind the failed Fundão Dam. We also wrote about how frequently these kinds of disasters occur around the world. The video above was created using Google Earth, comparing pre-spill imagery with images collected on Nov. 9 and Nov. 11. Our analyst Christian delineated the extent of the mine waste from a lake 70 miles downstream of the mine, all the way up to the town of Bento Rodrigues, the damaged Santarem Dam and the failed Fundão impoundment (skipping a section of the river with cloudy imagery). Even further downstream, more than 400 miles away, the Rio Doce ran orange for months afterwards.

Southeast Asian fires emitted most carbon since 1997 - Forest fires that blanketed Southeast Asia in thick haze last year released the greatest amount of climate-changing carbon since record blazes in 1997, producing emissions higher than in the whole of the European Union, scientists said on Tuesday. Singapore, Malaysia and northern Indonesia choked under a layer of toxic smog in September and October last year, caused by thousands of fires started in Indonesia to cheaply clear land for palm oil crops and for pulp and paper plantations. The fires and resulting haze, an annual occurrence, pushed up pollution levels, caused schools to close, flights to be disrupted and people to fall sick across the region. Last year's blazes were the worst for years with El Nino, a warming of sea-surface temperatures in the Pacific, causing tinder-dry conditions. The study by scientists from the Netherlands, Britain and Indonesia, published in the online journal Scientific Reports recently, was the first scientific report calculating greenhouse gas emissions from the fires using measurements on the ground combined with satellite observations.The researchers first measured the ground-level smoke composition from peatland burning in the region, including in Indonesia's Central Kalimantan province, one of the worst-hit areas. They combined the data with satellite information to work out greenhouse gas emission estimates from the fires. They concluded that 884 million tonnes of carbon dioxide was emitted in the region last year, with 97 percent originating from forest fires in Indonesia.

Beijing Is Sinking At An Alarming Rate: Study: Loss of groundwater is causing China's capital city to sink by as much as four inches per year in some districts, according to research published in the journal Remote Sensing. Researchers identified excessive use of underground water as the cause. In Beijing, water is extracted from soil for industrial, agricultural and household use, CNN explains. Beijing, home to more than 20 million people, is considered one of the most water stressed cities in the world, the study notes. The depletion of water and rapid sinking could have severe consequences for the city's infrastructure, including damage to buildings and public railways. The study used satellite images and GPS to analyze topographical trends collected between 2003 and 2010.A map included in the study shows the severity of the sinking by region. Researchers said that the Chaoyang district, which includes many hotels and office buildings from Beijing’s Central Business District, is the most afflicted area, the Telegraph reports. Officials in Beijing have taken several measures in an attempt to alleviate the city's water issues. A series of canals and tunnels called the South-North Water Diversion was developed to bring nearly 12 trillion gallons of water to the capital annually. The city also plans to phase out 367 water wells, according to the Guardian.

Florida's coral reef system in rapid decay, scientists say - CNN -- The most terrifying thing lurking under the waters of the Atlantic Ocean may not come with razor sharp teeth. Scientists say Florida's coral reef system, the third-largest in the world, is in rapid decay, with a variety of threats edging the delicate ecosystem closer to collapse sooner than anyone believed possible. "We didn't think this would happen for another 50 or 60 years," said Chris Langdon, a marine biologist at the University of Miami, who published a new report on the health of the reef in May. "This study showed a whole new thing we didn't even know was threatening them." Langdon and his team discovered that as ocean water becomes more acidic, due to carbon dioxide levels in the atmosphere, the structures that support the coral are beginning to disintegrate.The acidification process occurs because during the carbon cycle -- nature's way of processing carbon -- the ocean absorbs much of it. As more fossil fuels are burned, sea water mixes with carbon dioxide and becomes carbonic acid. Because there's excess carbon dioxide, the ocean cannot process it as well as it used to -- and it ends up becoming more acidic. Read More "When you add acid to a piece of limestone, you'll see it fizz up. That's what we're talking about here," said Langdon. "We can definitely see less each year, less coral than the year before."

Zombie corals' pose new threat to world's reefs -- Zombie corals, which look healthy but cannot reproduce, have been discovered by researchers, dashing hopes that such reefs could repopulate areas destroyed by bleaching. Scientists have also found that a common ingredient in sunscreen is killing and mutating corals in tourist spots. The new evidence of harm to corals comes as the most widespread coral bleaching event in recorded history is sweeping the world’s oceans. Water temperatures have been driven up by a run of record-breaking hot years, caused by climate change and the El Niño phenomenon. Very warm water causes corals to lose the algae that normally live inside them and help them feed. Corals in every major reef region have already experienced severe bleaching. About 93% of the reefs on Australia’s Great Barrier Reef have been affected, and almost a quarter of the reef is now dead. Corals are hotspots of biodiversity and crucial nurseries for fish, upon which 1 billion people rely for nourishment. The new research, presented at the International Coral Reef Symposium in Hawaii, sampled 327 coral colonies across the Caribbean to assess the reproductive ability of apparently healthy elkhorn coral, which is a threatened species. In some places, including two sites in the Florida Keys, the coral had no eggs or sperm and therefore zero ability to reproduce. The scientists said this indicates these elkhorn corals are are essentially walking dead and will eventually die out, dubbing them “zombie corals”.

South China Sea reefs 'decimated' as giant clams harvested in bulk | Reuters: Ornaments made from the shells of endangered giant clams, renowned in China for having auspicious powers and the luster of ivory, have become coveted luxuries, a trend which has wreaked havoc on the ecosystem of the South China Sea. China banned harvesting of giant clams last year but in the tiny seaside town Tanmen on the southern island of Hainan, most stores still sell products made from the over four-foot-wide shells. The once sleepy fishing village has transformed over the past three years to harvest clams on an industrial scale. There are around 460 handicraft retailers, compared to 15 in 2012, with the industry now supporting around 100,000 people. The price of giant clams has risen 40-fold over the past five years, while the plundering of the seabed has led to severe degradation of the reefs, scientists and academics said. "With rising tensions in the South China Sea, Tanmen fishermen's important role in strengthening China's claims in the disputed waters and supporting the People's Liberation Army navy are recognized by the Chinese government," said Zhang Hongzhou, an associate research fellow at Nanyang Technological University in Singapore. "As a result, authorities have turned a blind eye."

Thanks to CO2 emissions, the smell of the sea is changing - What if the way things smell started to change? What if food inexplicably lost its aroma and your house no longer had its familiar homely scent? It would certainly be off-putting, but you’d probably manage. However, many animals depend on their sense of smell much more than we do, so they would probably be affected much more acutely by a change in this key sense. It seems that ocean acidification may be causing just such an alteration to the way that sea life smells the oceans. Or, more accurately, marine organisms’ ability to detect chemical signals is being altered by changes to ocean chemistry. We all know now that the CO2 emitted from burning fossil fuels is affecting the climate. Were it not for the fact that the oceans absorb about half of these CO2 emissions, the climate changes we are already experiencing would be far worse. But all that CO2 dissolving in the oceans comes with serious consequences. Once in water, CO2 forms carbonic acid, which in turn makes that water more acidic. Humans’ effect on the chemistry of oceans is already measurable; the CO2 we have emitted since the beginning of the Industrial Revolution has caused the world’s oceans to drop from a pH of 8.2 to 8.1. Now, that doesn’t sound like much, but the pH scale is logarithmic, so this actually means the oceans are 30% more acidic now than they were 200 years ago. If things carry on as they are, we can expect the oceans to be 150% more acidic by the end of the century, reaching pH 7.7. So far the hypothesis has been that the acidic water affects organisms’ chemical sensors, making them unresponsive to the molecules in the water. However, it turns out that this is by no means the whole story. My colleagues and I have found that the drop in pH actually directly affects the molecules being “smelt”. As the pH changes, the charge on the molecules alters and so does their shape.

Climate Change Poses Urgent Threat to Poor of Coastal Bangladesh: Nearly 12 million people live in poverty in the coastal regions of Bangladesh. The climate already poses a challenge to the lives and livelihoods of these households, seen vividly in the damage caused by Cyclone Roanu a few weeks ago. New projections published by the World Bank suggest climate change will pose an even more severe challenge over the next three decades. “Climate change is a major issue for all of us, but particularly the poor and vulnerable”, said Research Director Asli Demirguc-Kunt, who recently hosted a Policy Research Talk on the issue. “It’s been leading to crop failures, natural disasters, and the spread of water-borne diseases, and it’s an important push factor for migration.” Lead Environmental Economist Susmita Dasgupta, the main speaker at the event, presented the results of a seven-year body of research projecting the likely impact of climate change in coastal Bangladesh through 2050. Dasgupta’s projections highlight three current and growing risks with severe consequences for the poor: cyclonic inundation, river salinity, and soil salinity. Perhaps the most visible of all threats, cyclones destroy lives and livelihoods with alarming regularity in coastal Bangladesh: severe cyclones strike every three years on average. Rising sea levels—a direct result of climate change—will increase the land surface exposed to high levels of cyclonic inundation by more than 50 percent. Rising river salinity presents a less visible but equally damaging threat. River salinity increases health risks, causes a scarcity of drinking water and water for irrigation, and reduces the number of fish species—a critical source of protein for many households. Dasgupta projects a more than doubling of the number of poor exposed to saline rivers.

‘Unprecedented’: Scientists declare ‘global climate emergency’ after jet stream crosses equator: Climate scientists this week expressed alarm after “unprecedented” data showed the Northern Hemisphere Jet Stream crossing the Equator. In a column on Tuesday, environmental blogger Robert Scribbler noted that the Northern Hemisphere Jet Stream had merged with the Southern Hemisphere Jet Stream. “It’s the very picture of weather weirding due to climate change. Something that would absolutely not happen in a normal world,” he wrote. “Something, that if it continues, basically threatens seasonal integrity.” “Like many extreme events resulting from human-forced climate change — this co-mingling of upper level airs from one Hemisphere with another is pretty fracking strange,” Scribbler explained. “Historically, the Tropics — which produce the tallest and thickest air mass in the world — have served as a mostly impenetrable barrier to upper level winds moving from one Hemisphere to another. But as the Poles have warmed due to human-forced climate change, the Hemispherical Jet Streams have moved out of the Middle Latitudes more and more. ” “That’s bad news for seasonality,” he continued. “You get this weather-destabilizing and extreme weather generating mixing of seasons that is all part of a very difficult to deal with ‘Death of Winter’ type scenario.”

Pink Snow Seen As Alarming Climate Change Indicator - Some call it pink snow, some call it watermelon snow -- and now, a new study is calling it yet another symbol of the drastic melting in the Arctic. The appearance of the so-called pink snow, which Arctic explorers have observed for centuries, is the result of a red algae that likes to bloom in the frozen water. In a study published Wednesday in the journal Nature Communications, researchers found that those algal blooms are causing the ice to melt faster, and the algae is likely to grow more rapidly as climate change melts even more of the Arctic into the liquid water that feeds them. The presence of red algae, the study found, lowers the snow's albedo, or its ability to reflect light instead of absorbing it as heat (similarly to how a white T-shirt keeps you cooler in the sun than a black or colorful one does). Over a 100-day period during the melting season, the study found that snow affected by the red algae had a 13 percent lower albedo than white snow. "As we infer from our data, melting is one major driver for snow algal growth," the study notes. "Extreme melt events like that in 2012, when 97% of the entire Greenland Ice Sheet was affected by surface melting, are likely to re-occur with increasing frequency in the near future as a consequence of global warming. Moreover, such extreme melting events are likely to even further intensify the effect of snow algae on surface albedo, and in turn melting rates." That's because the glacier melt, which is disproportionately driven by the rise in global temperatures, is effectively watering the red algae, lead study author Steffi Lutz of the University of Leeds explained to Gizmodo.

This melting Greenland glacier is now producing terrifying tsunamis -- When Greenland’s melting glaciers lose large chunks of ice, it’s a violent process. Last year, for instance, scientists documented that gigantic glacial earthquakes are triggered by the rolling and tumbling of billion-ton icebergs as they break away and hit the glaciers to which they once belonged — hard.But large masses of ice falling into the waters of Greenland’s fjords do something else, too. Depending on the mass of ice lost and the particular configuration of the water and the fjord into which it surges, these events can also create destructive tsunamis, albeit of a relatively small scale (compared with how big open ocean tsunamis can get). And now, a recent study has found that at least one notable Greenland glacier, these tsunamis appear to be getting worse as melting advances.Martin P. Lüthi and Andreas Vieli of the University of Zurich in Switzerland studied what they call an “exceptionally well-documented” tsunami event that happened in July of 2014 in the fjord that terminates at the glacier Eqip Sermia. It’s one of the many large ocean-terminating glaciers of southwest Greenland and a popular tourist spot, since it has the advantage of being relatively close to the town of Ilulissat and reachable in a few hours by boat. Not only did the researchers have tide gauges and other instruments set up in the area around Eqip Sermia — a tourist boat was 800 meters away from the glacier when the ice collapse that triggered the tsunami happened. So the scientists could also analyze video from the boat that was published on YouTube, and is embedded below:

A 3.5-million-year-old river network preserved beneath the Greenland Ice Sheet -- An ancient drainage basin covering one fifth of Greenland predates the ice sheet and strongly influences the modern Jakobshavn Glacier, according to a new analysis of ice-penetrating radar data. Using detailed geophysical surveys of Greenland and Antarctica conducted during the past few decades, scientists can now peer below the thick glacial ice to learn more about the origin and evolution of the underlying landscape. To date, most of these studies of subglacial topography have focused on Antarctica. Now Cooper et al. have turned their attention to Greenland, where they have discovered the first evidence of an extensive network of rivers in the landscape beneath the Jakobshavn Isbræ, the island’s largest outlet glacier. Using a digital elevation model generated from ice-penetrating radar data and corrected for the weight of the modern ice sheet, the team charted the ancient river network using two different software packages. The results of both tools reveal a dendritic network of valleys radiating inland from the Jakobshavn Glacier —a landscape that, according to the researchers, covers an area comparable in size to the Ohio River Basin and predates the formation of the ice sheet about 3.5 million years ago.

Thanks to climate change, the Arctic is turning green-- Earlier this month, NASA scientists provided a visualization of a startling climate change trend — the Earth is getting greener, as viewed from space, especially in its rapidly warming northern regions. And this is presumably occurring as more carbon dioxide in the air, along with warmer temperatures and longer growing seasons, makes plants very, very happy.Now, new research in Nature Climate Change not only reinforces the reality of this trend — which is already provoking debate about the overall climate consequences of a warming Arctic — but statistically attributes it to human causes, which largely means greenhouse gas emissions (albeit with a mix of other elements as well. The roughly three-decade greening trend itself is apparent, the study notes, in satellite images of “leaf area index” — defined as “the amount of leaf area per ground area,” as Robert Buitenwerf of Aaarhus University in Denmark explains in a commentary accompanying the study — across most of the northern hemisphere outside of the tropics, a region sometimes defined as the “extratropics.” Granted, there are a few patches in Alaska, Canada and Eurasia where greening has not been seen.

Discovery exposes fragility of Antarctica’s Larsen C ice shelf -- Scientists have unearthed a 100m-thick river of ice beneath Antarctica’s Larsen C ice shelf, which they fear could accelerate its path to eventual collapse. A team led byProf Bryn Hubbard, director of the centre for glaciology at Aberystwyth University in Wales, lived on the ice shelf for several months examining what it looks like from the inside. Their new paper describes how the layer of solid ice could be speeding up the flow of ice to the ocean, potentially leading Larsen C towards a similar fate to its now-collapsed sister ice shelves, Larsen A and B. For more than 25 years, Hubbard has been studying the world’s icy expanses, venturing out each year to live and work on the ice for months at a time. Hubbard’s latest study has taken him to Larsen C ice shelf in Antarctica, a floating mass of ice protruding from the Antarctica Peninsula in the northern part of the continent. Several major ice shelves have collapsed almost completely, losing the vast majority of their mass in just a few months. The most widely reported of these “catastrophic breakup events” were the Larsen A and B ice shelves, which collapsed in 1995 and 2002, respectively. Larsen C is the next ice shelf in line, geographically-speaking. It is also the largest of the three sister shelves, with a surface area two and a half times the size of Wales.

Antarctica’s penguins could be decimated by climate change - For millions of years, fluctuating climates have impacted Adélie penguins, which breed on ice-free, rocky ground. Colder climates and expanding glaciers led penguins to abandon ice-covered breeding habitats. Warming climates and melting glaciers meant more breeding territory for these penguins, one of only two true Antarctic penguin species. (Emperor penguins are the other.) But warming may have reached a tipping point — and the Adélie penguin population could be decimated.That’s according to a study published this week in the journal Scientific Reports, which estimates that Adélie colonies could decline by as much as 60 percent by the end of the century. “It is only in recent decades that we know Adélie penguins population declines are associated with warming, which suggests that many regions of Antarctica have warmed too much and that further warming is no longer positive for the species,” the paper’s lead author, University of Delaware researcher Megan Cimino, said in a statement. These penguins breed on the entire Antarctic continent. Other penguins breed on the northern tip of the Antarctic Peninsula, which scientists warn is quickly warming.

If You're Younger Than 31, You've Never Experienced This: The last time the global monthly temperature was below average was February 1985. That means if you are 30 years old or younger, there has not been a single month in your entire life that was colder than average.The National Oceanic and Atmospheric Administration recently announced May 2016 as the 13th consecutive warmest month on record -- the longest streak since global temperature records began in 1880. "The combined average temperature over global land and ocean surfaces for May 2016 was the highest for May in the 137-year period of record, at 0.87°C (1.57°F) above the 20th century average of 14.8°C (58.6°F), besting the previous record set in 2015 by 0.02°C (0.04°F)," NOAA said. NASA data shows global temperatures in May were 1.67 degrees Fahrenheit above the 1951-1980 average. NASA's data shows that July 1985 was the last month with a below-average global temperature, meaning there have been 370 consecutive months of average or above-average temperatures -- slightly fewer than by NOAA's count. Both NOAA and NASA, which use different dates to determine long-term average temperatures, declared 2015 the hottest year on record. The extreme heat was driven by both man-made global warming and the winter’s powerful El Niño event. And 2016 is already well on its way to toppling last year's record. In fact, Gavin Schmidt, director of NASA’s Goddard Institute for Space Studies, gives it a near-100 percent certainty.

We Can’t Count on Geoengineering to Save Us From Climate Change, Scientists Warn - In December, governments around the world got together and grandly agreed to limit global warming to below 2℃ above pre-industrial levels—with a preference for keeping it below 1.5℃. The Paris Agreement recognizes that, if we fail, the outcome will be disastrous. But talk is cheap, and some scientists believe these goals will be nearly impossible to accomplish. They say we won’t be able to cut our carbon emissions enough to succeed. We’re on track for a world that’s at least 2.7℃warmer by 2100. Schemes that were once derided as unrealistic and dangerous are now being quietly put on the table, some scientists warn. Just ten years ago, technologies that can actively suck carbon from the atmosphere—for example, by turning over huge amounts of land to biofuel crops and capturing the carbon released by burning them, known as BECCS—were dismissed as unrealistic at best, and dangerous “‘geoengineering’” that could destabilize the planet at worst. Now, with the carbon clock ticking, and new ambitious targets post-Paris, approaches that were once unthinkable fantasies increasingly underlie the very models that climate negotiators rely on, some researchers warn. Many activists and scientists alike are wary that we’re learning to love the bomb. “A lot of assumptions about how we’ll stay under 2 degrees are relying massively on negative emissions,” Teresa Anderson of the London-based NGO ActionAid told an assembled panel at the latest UN climate meeting. She was referring to the fact that, when the UN considers scenarios that could keep the world under a 2-degree warming target, most of them assume we start removing carbon from the air in huge quantities sometime around 2050. This would require either an entirely new technology to capture and stably store the carbon, she argued, or the expansion of largely untested technologies to an enormous scale. Not only are they untested. They could have disastrous consequences.

EU may have to adjust CO2 target if UK leaves bloc-UN ...: (Reuters) - The European Union (EU) may have to reassess its carbon emissions reduction target for 2030 if Britain leaves the bloc, the United Nations' climate chief Christiana Figueres said on Tuesday. As a member of the EU, Britain contributes to the bloc's overall commitment to reduce carbon emissions as part of a global climate pact but if it decides to withdraw from it, the EU might have to adjust its target. "It would perhaps mean that the EU would have to take a look at the target that it has put into its INDC (Intended Nationally Determined Contributions) and maybe make some adjustments to that," said Christiana Figueres, executive secretary of the United Nations Framework Convention on Climate Change (UNFCCC), at the Business and Climate summit in London. Signatories to the global climate agreement reached in Paris in December have submitted Intended Nationally Determined Contributions (INDCs) through which they outline ways in which they intend to meet decarbonisation targets. Under the agreement, the EU has agreed to cut emissions by at least 40 percent by 2030 from 1990 levels and has to decide how to divide that up between member states.

World Bank to back India’s solar power initiative (AP) — The World Bank signed an agreement on Thursday with the Indian-led International Solar Alliance to boost solar energy in developing countries by mobilizing $1 trillion in investments by 2030. It said the agreement, signed by World Bank President Jim Yong Kim and Indian Power Minister Piyush Goyal, established the World Bank as a financial partner of the alliance. The alliance was launched by India and France at the U.N. Climate Change Conference in Paris last November and includes about 120 countries that support the promotion of solar energy. As part of the agreement, the World Bank will work with other multilateral development banks and financial institutions to develop financing for solar energy development, the World Bank said. In addition, it plans to provide more than $1 billion to support India’s initiatives to expand solar power generation through projects including solar rooftop technology, infrastructure for solar parks and transmission lines for solar-rich states, it said. “India’s plans to virtually triple the share of renewable energy by 2030 will both transform the country’s energy supply and have far-reaching global implications in the fight against climate change,” Kim said in the statement. Also Thursday, the World Bank and the Indian government signed an agreement for a $625 million loan to finance the installation of at least 400 MW of solar panels that will help reduce greenhouse gas emissions by displacing thermal generation.

U.S., Canada and Mexico vow to get half their electricity from clean power by 2025 - The leaders of the United States, Canada and Mexico will pledge Wednesday to source half their overall electricity with clean power by 2025, according to administration officials.The commitment — which will be a joint one, rather than an individual commitment by each nation — represents an aggressive target given the current reliance by the United States and Mexico on fossil fuels for much of their electricity supply. Roughly 59 percent of Canada’s electricity is generated by hydropower operations, with another 16 percent coming from nuclear plants, so it has already surpassed the targeted benchmark.The new commitment includes not just renewables but also nuclear and carbon capture and storage plants and energy efficiency. Under that definition, 37 percent of North America’s electricity in 2015 came from clean energy sources.President Obama will travel to Ottawa Wednesday to meet with Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto as part of this year’s North American Leaders Summit. The upcoming pledge highlights how collaboration on climate between the United States and Canada has accelerated since Trudeau, leader of his country’s Liberal Party, was elected last fall.White House senior adviser Brian Deese described it as “an aggressive goal,” but one that “is achievable continent-wide.”He added that the alignment between Canada, Mexico in the U.S. on climate and energy policy “is stronger than it has been in decades… In all three countries, there is a significant move toward a clean energy economy.”Roughly 13 percent of U.S. electricity comes from hydropower and other renewable sources, according to the Energy Information Administration, with another 20 percent stemming from nuclear power plants.

VW agrees to buy back diesel vehicles, fund clean air efforts | Reuters: German automaker Volkswagen AG will pay as much as $15.3 billion after admitting it cheated on U.S. diesel emissions tests for years, agreeing to buy back vehicles from consumers and provide funding that could benefit makers of cleaner technologies. The largest-ever automotive buyback offer in the United States came in a deal announced on Tuesday by the Justice Department, Federal Trade Commission, Environmental Protection Agency and California state regulators. The proposed consent decree confirmed that VW will set aside $10.033 billion to cover buybacks or fixes for diesel cars and sport utility vehicles that used illegal software to defeat government emissions tests. VW admitted in September that it installed secret software that allowed U.S. vehicles to emit up to 40 times legally allowable pollution. VW still may face criminal charges and oversight by an independent monitor, a person briefed on the matter said. A criminal settlement could include measures to ensure VW would not engage in further cheating. Shares of VW rose as much as 5 percent on Tuesday, and closed up 1.7 percent at 107.85 euros.

American Drivers Regain Appetite for Gas Guzzlers - The single most effective action that most Americans can take to help reduce the dangerous emissions that cause climate change? Buy a more fuel-efficient car. But consumers are heading in the opposite direction. They have rekindled their love of bigger cars, pickup trucks and sport utility vehicles, favoring them over small cars, hybrids and electric vehicles, which are considered crucial to helping slow global warming. So far this year, nearly 75 percent of the people who have traded in a hybrid or electric car to a dealer have replaced it with an all-gas car, an 18 percent jump from 2015, according to Edmunds.com, a car shopping and research site. In 2008, President Obama set a goal of a million electric cars on the road by 2015 in the United States, but the total is now around 442,000, including plug-in hybrids. This year, electric and hybrid sales have dropped to 2.4 percent of new-car purchases. Falling gas prices have made big, heavy cars fashionable again, said Michael Sivak, the director of sustainable worldwide transportation at the University of Michigan’s Transportation Research Institute. In fact, demand for trucks, S.U.V.s and vans has rebounded to historic levels after they dropped sharply in 2008, when gas was $4 a gallon. That spells trouble for the environment. So-called light-duty vehicles, including S.U.V.s and pickups as well as cars, account for 16.2 percent of all greenhouse emissions produced in the United States, Dr. Sivak’s research shows, making them the biggest source of emissions that individuals control. Reducing tailpipe emissions “is perhaps the most important thing Americans can do,” said Andrew Jones, a co-director of Climate Interactive, a think tank. “We’re doing the opposite.”

The ethanol mandate has failed - Bob Goodlatte --Families are gassing up the car to head out of town, fueling up the boat for a weekend at the lake, and getting out the mower to tackle the lawn. But do you know the impact ethanol has on all of these activities? According to the Department of Energy, ethanol contains about one-third less energy than gasoline, meaning the more ethanol in your fuel, the less mileage a tank of gas will get you. Plus, ethanol has been found to damage or corrode many small engines found in power equipment, motorcycles, or boats. The result? More trips to the gas station and a greater strain on your wallet. The federal ethanol mandate, or Renewable Fuel Standard, requires that 36 billion gallons of renewable fuels be part of our nation’s fuel supply by 2022, whether we need it or not. A majority of this is being fulfilled by ethanol made from corn, diverting food and feed stocks to energy production. In recent years, we’ve seen the real world effects of this policy with volatile feed prices for livestock, higher costs for restaurants, lower fuel efficiency, and engine damage. The ethanol mandate has proven itself unworkable with the negative impacts on Virginia’s economy far outweighing intended benefits. Under the Environmental Protection Agency’s most recent proposal, more and more ethanol will be forced into the fuel supply in the next few years – beyond the E10 gasoline most of us use today and what our current infrastructure and many small engines can handle. It’s clear that Congress must fix this broken policy. That’s why I’ve introduced a bill in the House of Representatives to eliminate the ethanol mandate altogether. As we work to build support for eliminating the mandate, I’ve also introduced bipartisan legislation to make significant reforms to it, including capping the amount of ethanol in the fuel supply at 10 percent and eliminating corn-based ethanol requirements.

The government is 'scamming us to grow corn ethanol instead of real food' - When shopping at the grocery store, you've probably noticed that organic fruits and vegetables cost significantly more than normal produce. One main reason for the price difference is that the US government doesn't encourage farmers to grow organic produce. When Tech Insider spoke to Kimbal Musk, the brother of Elon Musk, he explained that government tax subsidies primarily incentivize the production of corn ethanol (a biofuel that's combined with most gasoline). Since 2009, the government has allocated at least $186 million toward corn ethanol. The government is "scamming us [farmers] to grow corn ethanol instead of real food," Musk says. Although 45% of Americans say they seek out organic produce, fewer than 1% of US farms are actually organic. Only about 2% of all farmland in the US is used to grow fruits and vegetables, both organic and not. Because of government tax incentives, farmers can make more money by growing corn than by producing fruits and vegetables, Musk says. Since organic produce is more expensive for the farmers to grow, that jacks up the prices of those products in stores. And that's a moral issue, as rising food prices disproportionately affect the poor.

FEW 16: Ethanol plants seek to diversify to boost growth | Biofuels International Magazine: US ethanol plant owners are seeking to diversify their operations to boost growth, according to Novozyme’s global marketing manager Jack Rogers. Speaking to Biofuels International at the Fuel Ethanol Workshop (FEW) Conference in Milwaukee, US, about the US ethanol market, Rogers said: “Corn and ethanol prices have gone down in recent years but there has been an increasing demand for ethanol. “There is still a lot of overcapacity in the industry. This has pushed down margins for producers. So they need to look at efficiency and optimisation to be successful and look for other revenue streams in addition to the ethanol itself. Separately, speaking to Biofuels International at the FEW conference, Renewable Fuels Association senior vice president, Geoff Cooper, said: “The ethanol industry is a decent place today in terms of margins and demand and market structure. Cooper said that around 99% of the ethanol that is used domestically in the US is blended as E10 (10% ethanol and 90% gasoline blend). He added: “We see a little bit of ethanol being consumed in higher level blends. We are exporting close to a 1bn gallons this year. It is being used in those markets the same way. Primarily for use in E10 ethanol blends. Sometimes lower level blends. “We are hoping to see growth in two areas. The first area is in use in higher level blends – E85 and E15. “Eventually, we like to see this used in E20 and E35 and that range. We see a tremendous growth opportunity for export volumes.” He added that the industry saw the export market as an immediate-term opportunity for growth.

New North Carolina Bill Allows Duke Energy To Dodge Coal Ash Cleanup Again --While residents and environmentalists urge Duke Energy to clean up its coal ash pits, North Carolina’s biggest utility — and the governor’s former workplace — just got another pass from the legislature. Duke will likely not have to clean up seven of its unlined coal ash pits, where the byproduct of coal-fired power plants is stored. Instead, the company can opt to simply fortify its dams and pipe drinking water to nearby residents. The chemicals and heavy metals in coal ash, which include mercury and arsenic, can leach into local water supplies, especially since it is usually mixed with water into a slurry. In 2014, despite Duke’s assurances that the storage ponds were safe, a dam ruptured and sent thousands of tons of toxic sludge into the Dan River, forcing regulators to deal with the threat of future contamination — and the results of water testing that show nearby communities already have tainted wells. Under legislation passed shortly after the Dan River spill, the company would have been required to clean up all its storage sites. But new, less demanding legislation passed the House on Thursday evening and is expected to be signed by Gov. Pat McCrory (R), who worked at Duke for 28 years before entering politics. “What has been removed from this bill because it is fatal to Duke’s plans is serious emphasis on protecting the state’s water supplies,” Frank Holleman, a senior attorney with the Southern Environmental Law Center, told ThinkProgress. He pointed out that agreeing to pipe water to local communities without removing the coal ash pits was tantamount to Duke acknowledging that it has already or is likely to contaminate ground water.

Opponents of proposed coal project demand investigation: Several environmental groups are calling for a federal investigation into Utah's plans to invest $53 million in a proposed expansion of a California port to export coal to Asia. The funds from federal mineral royalties are intended for local public works projects, but would instead be loaned to four counties for the proposed Oakland Bulk and Oversized Terminal. Keith Heaton is the board chairman of Utah's community impact fund that is involved in the project's financing. He has said the funding plan is not unusual. Groups including the Center for Biological Diversity and Sierra Club questioned the legality and ethics of the plan in a 19-page letter to U.S. Attorney General Loretta Lynch and others. "The contents of this letter require an external review by several oversight bodies. The economic, fiscal, financial, environmental, governance, ethical and political red flags raised by the state of Utah's actions are too numerous to ignore," Tom Sanzillo, an executive with the research group Institute for Energy Economics and Financial Analysis, which supports reducing coal dependence, said in a statement. "This appears to represent the worst kind of corporate cronyism that members of the Utah Legislature are usually so fond of rallying against," Joshua Kanter, board chairman of the Alliance for a Better Utah, said in a news release. "Diverting these funds is not only improper, but will leave these communities without the money they really need to help them retool their economic base as the coal industry continues its decline. There has been no showing that there is a shortage of available port capacity for Utah coal or that exporting Utah coal to Asia makes economic sense, either of which is easily addressed by the free market without this shell game and abuse of the public trust." Supporters say a boost in coal exports is what the troubled industry needs.

Oakland Officials Vote to Ban Coal Handling and Storage at New Shipping Terminal - WSJ -- City officials in Oakland, Calif. late Monday moved to block a proposal that would have made the city a gateway for Utah coal to be shipped overseas, after the issue became a political flashpoint between environmentalists and a longtime political ally to Gov. Jerry Brown. The Oakland City Council voted to ban the handling and storage of coal and coke at the city’s terminals and bulk material facilities. The unanimous vote came after a long, packed city council meeting; advocates and opponents of the ban demonstrated outside. A second, largely procedural, vote is expected in July. The ban aims to derail a proposed deal that would have granted four coal-producing counties in Utah rail access to a major commodities shipping terminal under development on city land, adjacent to the Port of Oakland. The new terminal is part of a major redevelopment of an old Army Base the city hopes will bring thousands of jobs to a city that still has pockets of poverty and violence, even as the region’s tech sector booms and housing costs rise. Utah had agreed to invest $53 million in the project for the right to export its goods. California ports in Stockton, Richmond and Long Beach export coal, but because of climate change and pollution concerns, such terminals have become highly contested on the West Coast. Environmentalists have defeated similar proposals in Oregon and Washington.

Indonesia faces environmental time bomb after coal bust | Reuters: Thousands of mines are closing in Indonesia’s tropical coal belt as prices languish and seams run dry. But almost none of the companies have paid their share of billions of dollars owed to repair the badly scarred landscape they have left behind. Abandoned mine pits dot the bare, treeless hillsides in Samarinda, the capital of East Kalimantan province on Indonesia's part of Borneo island. It is ground zero for a coal boom that made Indonesia the world's biggest exporter of the mineral that fuels power plants. Abandoned mining pits have now become death traps for children who swim in them, and their acidic water is killing nearby rice paddies. Indonesia has tried, mostly in vain, to get mining companies to keep their promises to clean up the ravaged landscape. But it doesn't even have basic data on who holds the many thousands of mining licenses that were handed out during the boom days, officials say. "Nobody was in control," said Dian Patria, who works on natural resources at the country's Corruption Eradication Commission (KPK). Patria estimated that 90 percent of the more than 10,000 mining license holders had not paid the reclamation funds they owe by law. One-third are for coal. Even if they wanted to, many companies now lack the cash. The same large banks that leant billions during the boom have now pulled out of coal, wary of the sector's commercial outlook and contribution to climate change. The problem is not unique to Indonesia. As mineral prices languish, even major global miners are trying to avoid hundreds of millions of dollars in increasingly hefty closure costs, mostly by selling off pits.

SC, Dept. of Energy in court about nuclear fuel lawsuit (AP) — Attorneys for the federal government and the state of South Carolina are in court arguing about a lawsuit concerning an unfinished plant to turn old plutonium into commercial nuclear reactor fuel. A federal judge in Columbia is hearing arguments Thursday in South Carolina’s lawsuit against the U.S. Department of Energy over the mixed oxide fuel project at the Savannah River Site near Aiken. South Carolina is suing the federal government because the project is well past its start date. The state is seeking daily fines of up to $1 million, as well as the removal of plutonium from the state. The federal government is asking that the lawsuit be dismissed, saying that such issues are best handled in a different type of court.

Sheen in Lake Ontario identified as oil from nuclear plant (AP) — A spokesman for the Nuclear Regulatory Commission says a sheen on Lake Ontario has been traced to a small oil spill from the Fitzpatrick Nuclear Power Plant. The U.S. Coast Guard responded Sunday to a report of a sheen near the plant in Scriba, about 40 miles north of Syracuse. Neil Sheehan of the NRC tells the Rochester Democrat and Chronicle (http://on.rocne.ws/292vHor ) that plant operator Entergy Corporation found the source of the oil on the roof of a turbine building. Sheehan says it appears that 20-30 gallons of oil leaked from a vent for the hydrogen seal system and entered the lake through a discharge drain. Sheehan says there was no adverse impact on plant operations. Sheehan says Entergy has taken steps to prevent any further discharges.

Frackfree group to put fracking ban on Youngstown ballot again -(WYTV) – For the sixth time, voters will have a say on whether to ban oil and gas drilling in the city of Youngstown.Those behind Frackfree Mahoning Valley say they have enough signatures to get the issue back on the ballot again. If the issue passes, it would stop hydraulic fracturing, injection wells and shale gas development within city limits.Monday afternoon, Frackfree Mahoning Valley presented nearly 2,500 signatures to City Hall. They only needed 1,270 signatures. If verified, the signatures would beat the August deadline in plenty of time to be put on the ballot.“In every city and every part of this state, if you allow fracking, you’re killing water, and if you’re killing water, it’s killing people. And we want everybody to be alive, healthy and safe,” said Rev. Young Tensley.Three Ohio communities have already passed this type of legislation, and three more will consider it this fall, along with voters in four counties.“You know, every time is different. And it’s really not about passing the Community Bill of Rights. It’s about raising awareness that citizens have the right to petition their government when their government is not taking care of them,” said Susie Beiersdorfer, a Community Bill of Rights committee member.Ray Beiersdorfer, a backer of the initiative, said that the margin of defeat for the proposal had become narrower at each election, except for the initiative that was defeated by a margin of over 15 percent in November 2014.“Over time, more and more people are getting educated,” Beiersdorfer said.

Petitions submitted for anti-fracking county law - athensnews.com: The Athens County Bill of Rights Committee submitted a proposal to turn Athens County into a charter government to the local Board of Elections Wednesday morning. The ACBORC was unable to get a charter proposal on the November 2015 ballot after a decision by the Ohio Supreme Court, but with that decision in hand and alterations to the proposal made, the group has gathered well over the 1,500 petition signatures required to put the anti-fracking proposal on the ballot this year. Group spokesperson Dick McGinn said Wednesday the group was submitting the proposal with 2,392 signatures on 96 petitions circulated by 32 petitioners.The committee’s charter did not and does not propose to alter the structure of Athens County government with regard to officeholders or duties, but does seek to assert local control over regulation of oil and gas hydraulic fracturing and other activities related to fossil-fuel development (including waste-injection wells). “The proposed charter for Athens County includes a Bill of Rights, an outright ban on injection wells, an outright ban on the sale of county water for use in fracking anywhere and a charter review process,” he said. “The charter will empower the county commissioners to pass laws, and gives every citizen in the county equal powers of initiative, referendum and recall.” While the city of Athens and several other Ohio communities have passed similar anti-fracking bills of rights, none of them has survived court challenges, and the Ohio Supreme Court has made it clear that local governments cannot prohibit what state law permits with regard to oil and gas development.

Petitions submitted for second attempt to place anti-fracking law on county ballot - The Athens County Bill of Rights Committee has once again submitted petitions in an effort to place a charter ballot initiative on the November ballot. The committee had been unsuccessful in placing a similar initiative on the November 2015 ballot after the petition, along with at least two others in Ohio, were rejected by Secretary of State Jon Husted. According to Messenger reports in March, the committee had revised the petition and was once again preparing to collect signatures. Bill of Rights committee member Dick McGinn told The Messenger on Thursday that the group had redone the charter to comply with the ruling last fall and began circulating petitions on April 1. A total of 2,392 signatures were collected on 96 petitions by 32 petitioners before being submitted on Wednesday, according to McGinn. Approximately 1,485 signatures are required. McGinn said that the charter is important as the government is not protecting the people with regard to injection wells, so people are taking it upon themselves to protect themselves. McGinn said that the ability to take steps such as the charter initiative go back to the original plan of the American Revolution, allowing the people to govern themselves. He added that the committee is not complaining about the structure of the government and this charter would not change the structure of the government, but that this would empower the commissioners and the public. Accoridng to previous Messenger reports, the language of the charter would make it unlawful for any corporation or government to “deposit, store, treat, inject, dispose of, transport or process wastewater, produced water, ‘frack’ water, brine or other substances, chemicals or by-products that have been used in, or result from, the unconventional extraction of gas and oil, including but not limited to high volume hydraulic fracturing, acidification and other techniques on or into the land, air or waters of the county of Athens.”

It’s unanimous: ‘No fracking in Wayne forest’ - athensnews.com: At a public meeting in Athens Tuesday night on a proposal to open parts of Ohio’s Wayne National Forest to oil and gas leasing, each one of 30 speakers spoke against it. Nobody spoke in behalf of the proposal, though it has received written and public support in Washington and Monroe counties, where the leasing is proposed. The Athens County Commissioners agreed to hold the meeting at the Athens Community Center after the federal Bureau of Land Management (BLM) and Wayne National Forest supervisors both declined to do so.With a standing-room-only crowd of more than 125 people, a wide variety of local and regional environmental activists, as well as interested citizens, took to the podium to speak out against the BLM’s tentative plans to lease more than 18,000 subsurface acres of the Marietta Unit of the Wayne’s Athens Ranger District for oil and gas development. That plan, if approved, would pave the way for oil and gas operations to apply for drilling permits on specific sites on the Marietta Unit, which then would go through an individual approval process. The drilling presumably would employ horizontal hydraulic fracturing (fracking) into deep-shale layers. In a draft environmental assessment this past spring, the BLM issued a “finding of no significant impact” for leasing on 40,000 subsurface acres in the national forest’s Marietta Unit, located northeast of Marietta in Washington and Monroe counties. Those acres include more than 18,000 acres for which 50 oil and gas companies have submitted “expressions of interest.”

Yale to Study Fracking At 100 Belmont County Homes - Yale University researchers plan to take air and water samples from 100 Belmont County homes to determine how Marcellus and Utica shale fracking impacts the environment. Considering the many active drilling operations, pipelines and compressor stations one can find in Belmont County, the researchers may find plentiful data in the field. Nicole Deziel, an assistant professor in the Yale Department of Environmental Health Sciences, will serve as the study’s lead investigator. Deziel said she and three other Yale researchers will base their operations in the science lab at the Olney Friends School in Barnesville until they leave in August. “We are very interested in whether this expansion in natural gas extraction could contribute to the contamination of water and air supplies,” Deziel said. “Ohio is understudied. Most of the studies are from Pennsylvania or Texas. “We hope our results will advance understanding of the potential for exposure to volatile organic compounds and other toxic substances in communities with natural gas extraction by comparing concentrations of chemical contaminants in homes in close proximity to natural gas wells and homes located farther away,” Deziel said. Deziel and her team are already visiting Belmont County homes. Although the industry is prevalent throughout eastern Ohio, she said the parameters of the study call for evaluating 100 homes in a single county. “The results should have a broader relevance to the surrounding region,” Deziel said. “We have an open mind. We are going to follow the data. Much more work is needed to fully understand the risk to the water and the air.” “We want to know what is in the water that people are using for drinking and bathing,” Deziel said. “We will be collecting air samples from inside and outside the home.”

Ky. residents fight back over radioactive waste - A new citizen's group in Estill County is calling on Kentucky environmental regulators to open up their enforcement discussions with a landfill owner over the dumping of radioactive waste last year, as state officials sought to assure residents of their safety."This relationship between the environmental cabinet and the violators of state statutes (and settlement discussions) to be held in secret, is an age-old tactic," said Craig Williams, a member of the newly formed Concerned Citizens of Estill County Inc. "What's needed is a solutions-based approach that involves all the interested and potentially affected parties, including but not limited to the Citizens of Estill County, and their duly elected representatives," said Williams, program director of the Kentucky Environmental Foundation, who for years has pressed for safe disposal of nerve gas at a federal facility in Richmond. The new group will have to sue the state if it doesn't get included in the talks, he said, with a goal of reaching "a resolution that everyone can agree with."

State seismic network helps tell fracking quakes from natural ones - Up on the ledge, in a clearing behind the office at Keystone State Park in Derry Township earlier this month, Kyle Homman peered at an app on his iPod and hopped. The earth moved ever so slightly at the Westmoreland County site and one of the newest permanent stations in Pennsylvania’s expanding earthquake monitoring network picked up the tremor. Mr. Homman, the network’s manager, had already re-created this assemblage, alone or with help, at 19 other sites across the state. The sensor was connected to a data logger kept on the surface in a waterproof box connected to the park office by wires threaded through sealed pipes for power and internet. Each site has been selected to fill in spots of weak coverage between the existing Pennsylvania seismic network’s 10 stations and a dozen others operated by institutions that share their data publicly. When complete in the near future, the expanded network — funded for three years with a combined $531,000 from the state departments of Conservation and Natural Resources and Environmental Protection, and operated by Penn State University — will provide the best open and ongoing record of the state’s shaking depths that Pennsylvania has ever had. “Pennsylvania has a history of small earthquakes, but we don’t understand the causes very well,” Pennsylvania state geologist Gale Blackmer said. “The more events you can map out, the better your chances are of figuring out what’s going on.” . As it happens, the Pennsylvania network has already picked up signals that point to both types of quakes. In mid-April, a magnitude 2.2 earthquake near Titusville was likely a natural event, said Andrew Nyblade, a Penn State geosciences professor who championed the expanded seismic network and is the project’s principal investigator. A week later, a series of five small tremors in Lawrence County that ranged from magnitude 1.7 to 1.9 emerged near a Utica Shale gas well that was being fracked.

Oil and Gas Leaders Find New Hope in Cracker, Export Terminal Projects -- Oil and Gas Leaders Find New Hope in Cracker, Exp: — Royal Dutch Shell’s decision to build its ethane cracker near Monaca, Pa. and Dominion Resources’ plans to export liquefied natural gas from from the Cove Point facility in Maryland give industry leaders hope that demand for their products will continue to grow. As drillers dig deeper and farther to achieve maximum output from wells, the limits of the Marcellus and Utica shale boom continue to stretch. “We are building crackers,” said Bernadette Johnson, managing director of Ponderosa Advisors, which provides analytical research for the industry, said while speaking during the 2016 DUG East Conference this week. “This is very good for the Marcellus and Utica region.” Recently, the U.S. Energy Information Administration projected domestic ethane production to grow from 1.1 million barrels per day in 2015 to 1.4 million barrels each day in 2017, an increase of 300,000 barrels daily — with a significant portion to be drawn from Marcellus and Utica drilling. In fact, there is so much ethane in the region that pipeline operators Sunoco Logistics and Kinder Morgan collectively plan to spend about $3.5 billion to move the liquid out of Ohio, West Virginia and Pennsylvania for processing elsewhere. Industry leaders believe Shell’s ethane cracker makes it more likely that PTT Global Chemical will eventually decide to build a similar facility at Dilles Bottom because Shell’s commitment shows the projects are viable in the region. As global energy demands increase, U.S. natural gas can help quench the thirst for power, but only if producers can move their fuel abroad.

Where will all the new US olefins go? - The Barrel Blog: It is well known that shale-driven ethylene expansions are taking place in the North American market. The question is, will these growing supplies of olefins outstrip the ability of units downstream to take in product? US ethylene production is at an all-time record level, according to data from the American Fuel and Petrochemical Manufacturers association. Data for the first quarter of 2016 showed that ethylene production was at 6.857 million mt, down fractionally from the previous quarter but nearly 10% higher than the level from the first quarter of 2015.Gazprom H1 gas exports to Europe up 14% year-on-year: CEO - Natural Gas | Platts News Article & Story: Gazprom's gas sales in Europe in the first half of 2016 rose by 14.2%, or 10.6 Bcm, compared with the same period of last year, Gazprom CEO Alexei Miller said Thursday, signaling a sharp slowdown in export growth in the second quarter of this year. Addressing Gazprom's annual general meeting in Moscow, Miller also hailed the utilization rate of Russia's Nord Stream gas pipeline to Europe, which, he said, far outweighed that of LNG imports. Speaking of Gazprom's supplies to Europe and Turkey in the first half, Miller provided no absolute figures. But according to Platts' analysis of Gazprom data, a 10.6 Bcm increase on the 74.3 Bcm sold in Europe and Turkey (excluding the former Soviet Union states) in the first half of 2015 means H1 2016 sales of 84.9 Bcm. This puts Gazprom well on track to reach its most recently stated target from May of total exports to Europe and Turkey in 2016 of 165 Bcm. However, the 10.6 Bcm increase in the first half confirms that the growth in Gazprom's gas sales to its core foreign markets stalled in the second quarter after strong growth at the start of the year.Meanwhile, the projected balance for the propylene market is less stable. With the increase in lighter feedstock cracking the US has seen production of cracker co-products drop off over the past 10 years. In addition, new crackers being built in the US are all geared at maximizing ethane consumption, which produces lower levels of propylene, crude C4s and aromatics.

4 States Struggling to Manage Radioactive Fracking Waste - The Marcellus Shale has transformed the Appalachian Basin into an energy juggernaut. Even amid a recent drilling slowdown, regional daily production averages enough natural gas to power more than 200,000 U.S. homes for a year.But the rise of hydraulic fracturing over the past decade has created another boom: tons of radioactive materials experts call an “orphan” waste stream. No federal agency fully regulates oil and gas drilling byproducts—which include brine, sludge, rock and soiled equipment—leaving tracking and handling to states that may be reluctant to alienate energy interests.“Nobody can say how much of any type of waste is being produced, what it is and where it’s ending up,” said Nadia Steinzor of the environmental group Earthworks, who co-wrote a report on shale waste. [Earthworks has received funding from The Heinz Endowments, as has the Center for Public Integrity.]The group is among several suing the U.S. Environmental Protection Agency to regulate drilling waste under a federal system that tracks hazardous materials from creation to final disposal or “cradle to grave.” The EPA declined to comment on the lawsuit but is scheduled to file a response in court by early July. The four states in the Marcellus are taking different approaches to the problem; none has it under control. Pennsylvania has increasingly restricted disposal of drilling waste, while West Virginia allows some landfills to take unlimited amounts. Ohio has yet to formalize waste rules, despite starting the process in 2013. New York, which banned fracking, accepts drilling waste with little oversight.

NY Sen. Schumer: Make oil safer before train shipments - (AP) — New York Sen. Charles Schumer says oil companies should be required to make their crude less dangerous to transport before loading it onto trains. The Democrat said Wednesday that much of the oil being shipped via train can be rendered less hazardous by removing flammable gasses first. Oil coming from North Dakota’s Bakken Shale formation is considered more volatile than other types of oil because it contains a greater amount of gas. Schumer says he’s asking the U.S. Department of Transportation to impose the requirement, which he says would reduce the risk of train car explosions. Albany is a hub for crude-by-rail shipments from North Dakota to East Coast refineries.

Evaluating economics of a new natural gas pipeline - part 4 - It’s no secret that a long list of pipeline projects have been proposed to help move natural gas out of the Northeast production areas. But if you were a Marcellus or Utica producer, how would you decide whether you were interested in new capacity that hadn’t been proposed or built yet? Of course, pipeline companies have armies of engineers, cost estimators, and market analysts to bring one of these monster projects to fruition. But for anyone else, particularly in the early stages, how do you even know it’s a reasonable idea? For anyone testing a concept, you need a way to ballpark some scenarios for a new pipe. We’ve been running a blog series on our RBN Pipeline Economics Estimation Model, a quick, rule-of-thumb “sanity test” for new capacity. Today, we wrap up our walk-through of the model, with a real-world example to gauge the accuracy of the model, and then with a discussion on how the model can be used to measure economies of scale in picking the minimum volume you probably need for a new pipeline.

Fracked Gas LNG Exports Were Centerpiece In Promotion of Panama Canal Expansion, Documents Reveal - Steve Horn, DeSmogBlog - After nearly a decade of engineering work on the project, the Panama Canal’s expansion opened for business on June 26. At the center of that business, a DeSmog investigation has demonstrated, is a fast-track export lane for gas obtained via hydraulic fracturing (“fracking”) in the United States. The expanded Canal in both depth and width equates to a shortened voyage to Asia and also means the vast majority of liquefied natural gas (LNG) tankers — 9-percent before versus 88-percent now — can now fit through it. Emails and documents obtained under open records law show that LNG exports have, for the past several years, served as a centerpiece for promotion of the Canal’s expansion by the U.S. Gulf of Mexico-based Port of Lake Charles. And the oil and gas industry, while awaiting the Canal expansion project’s completion, lobbied for and achieved passage of a federal bill that expanded the water depth of a key Gulf-based port set to feed the fracked gas export boom. Control of the Panama Canal by U.S. big business and Wall Street has, for over a century, served as a focal point of U.S.foreign policy in the Americas. Jill Biden’s presence as part of an official Presidential Delegation at the expanded Canal’s opening ceremony symbolized the importance of the waterway and de jure role of the U.S. government in pushing for its expansion over the past several years. So too did the attendance of the U.S. military’s Southern Command (SOUTHCOM). And in turn, the reported participation of LNG exports giant Cheniere Energy at the kick-off serves as a portrayal of the importance of the Canal’s expansion to the oil and gas industry. The Panama Canal Authority estimates that 20 million tons of LNG may pass through on an annual basis. “The volume projected by the Panama Canal Authority represents about 8 percent of global LNG trade and is equivalent to nearly 300 ships a year,” Bloomberg explained.

High-Level EPA Adviser Accused of Scientific Fraud in Methane Leak Research - Recently, over 100 community and environmental groups sent a letter urging the Environmental Protection Agency’s internal watchdog to investigate claims that a top methane researcher had committed scientific fraud and charging that he had made false and misleading statements to the press in response to those claims. Earlier this month, NC WARN, an environmental group, presented the EPA Inspector General with evidence it said showed that key research on methane leaks was tainted, and that one of the EPA‘s top scientific advisors fraudulently concealed evidence that a commonly-used tool for collecting data from oil and gas wells gives artificially low methane measurements. The 68-page complaint dated June 8 laid out evidence that David Allen, a professor of engineering at the University of Texas who served as the chairman of the EPA‘s Science Advisory Board from 2012 to 2015, disregarded red flags that his methane measuring equipment malfunctioned when collecting data from fracked well sites, a problem that caused his University of Texas study to lowball leak rates. “We used the terms scientific fraud and cover-up because we believe there’s possible criminal violations involved,” said NC WARN executive director Jim Warren. “The consequence is that for the past 3 years the industry has been arguing, based largely on the 2013 study, that emissions are low enough that we shouldn’t regulate them.”Dr. Allen’s research is a part of a high-profile but controversial research series sponsored by the Environmental Defense Fund that received one third of its funding from the oil and gas industry.

Bad News For Glut As US Offshore To Hit Record In 2017 - Companies pumping oil from the Gulf of Mexico will ramp up production in coming months, propping up American output, despite efforts to curb production and raise barrel prices. The United States currently produces 8.7 million barrels a day - a half a million less than where the figure stood last year, according to data from the Energy Information Administration (EIA). Low prices caused by the high output levels have kept oil exploration efforts at a minimum. Around 500,000 more barrels of crude from Mexico’s namesake gulf will go online by 2017, according to analysis by the Wall Street Journal that included government and private sector sources. "The projects are coming faster and sometimes bigger than expected,” Roger Diwan of IHS Energy told Dow Jones. "The ramp-up seems to have accelerated during low prices.” A handful of sizable fields had been funded for construction years prior, when prices were higher. The projects completed construction as scheduled and will begin production in the coming months. Once the fields become operational, the U.S. Department of Energy predicts offshore oil production will set a record in 2017 with 1.91 million barrels - 24 percent more than in 2015 - flowing out of surrounding bodies of water by next December.

Obama Administration Approved Gulf Fracking During Deepwater Horizon Disaster: Hydraulic fracturing (or "fracking") technology has been widely used to maximize oil-and-gas production in the Gulf of Mexico in recent years, and the government allows offshore drillers to dump fracking chemicals mixed with wastewater directly into the Gulf, according to documents released to Truthout and the Center for Biological Diversity under the Freedom of Information Act (FOIA). From 2010 to October 2014, the Obama administration approved more than 1,500 permit applications for offshore drilling plans that included fracking at hundreds of wells across the Gulf of Mexico, according to the documents. An unknown number of permit applications have yet to be released, so the scope of offshore fracking in the Gulf is likely larger. During this time regulators issued more than 300 "categorical exclusions" to exempt drilling plans that included fracking from complex environmental reviews. The use of categorical exclusions has been under heavy scrutiny since 2010, when the media learned that BP's drilling plan for the Deepwater Horizon rig was categorically excluded from review in the months before a deadly explosion on the platform caused the worst oil spill in United States history. Federal records show that regulators approved several drilling plans involving fracking in the Gulf of Mexico even as the Deepwater Horizon disaster unfolded and oil from a broken well spewed into the Gulf for weeks on end.

Obama Approved Over 1.5k Gulf Offshore Fracking Permits: Media Ignored It - Steve Horn - On June 24, the independent news website TruthOut broke a doozy of a story: the Obama Administration has secretly approved over 1,500 instances of offshore hydraulic fracturing (“fracking”) in the Gulf of Mexico, including during the Deepwater Horizon offshore spill disaster. Albeit released on a Friday, a day where many mainstream media reporters head out of the office early and venture to late-afternoon and early-evening Happy Hour specials at the bars, the TruthOut story has received deafening silence by the corporate-owned media apparatus. Google News, Factiva and LexisNexis searches reveal that not a single mainstream media outlet has covered the story. TruthOut got its hands on the story via documents provided by the Center for Biological Diversity (CBD). CBD explained inpress release that they “obtained the information following an agreement that settled a lawsuit challenging the federal Bureau of Ocean Energy Management’s and Bureau of Safety and Environmental Enforcement’s failure to disclose documents regarding the scope of offshore fracking in the Gulf under the Freedom of Information Act.” CBD also has published a list of all of the instances of offshore fracking in the Gulf of Mexico provided to it by BOEM, both in list-form and in visual map form.CBD says more documents are on the way too, which means the number of frack jobs that have occurred offshore in the Gulf could rise. A case in point: a well that recently leaked and spilled 90,000 gallons of oil into the Gulf was, as reported by CBS affiliate WWL, fracked by spill culprit Shell Oil.

This Map Shows Where Offshore Fracking Has Occurred in the Gulf of Mexico - Last week, a Truthout report exposed new details on the use of fracking technology in undersea oil-and-gas wells in the Gulf of Mexico, where fossil-fuel firms are allowed to dump billions of gallons of wastewater mixed with chemicals. From 2010 to 2014, federal regulators approved hundreds of permits and permit modifications to allow private companies to use fracking, acid treatments and other technologies to maximize oil-and-gas production in the Gulf, according to a trove of government documents released under the Freedom of Information Act. The Center for Biological Diversity, which fought in court to have the documents released, used 1,200 of these permit documents to map out fracked wells in the Gulf, including one well that was connected to a flow line that spilled 90,000 gallons of oil into the Gulf last month. The Center and Truthout are still waiting on federal officials to release more records, so the scope of fracking in the Gulf is likely even larger.

Environmentalists Not Sorry to See Fracking Stop in Arkansas - The 10-year boom in Arkansas natural gas production poured billions of dollars into the state, but some Arkansans are not sad to see it end. (See After Boom in Shale, Arkansas Oil Industry Faces Halt in Drilling.) For years, environmentalists and some residents have feared the health effects of hydraulic fracturing, which forces highly pressurized water, sand and chemicals into wells to break up rock and free up natural gas reserves. Emily Lane, a graduate student and researcher in environmental justice, is a native and resident of Greenbrier in northern Faulkner County, where a cluster of small earthquakes linked to the fracking process led the state Oil & Gas Commission to impose a ban on the drilling of waste disposal wells. That moratorium remains in place, according to Larry Bengal, the commission director, who said a map of the 1,150-square-mile area is available on the commission’s website. Disposal wells have also been tied to earthquake swarms in Texas, Oklahoma and other areas not usually associated with seismic activity. Lane said the moratorium shut down only four waste wells, and is concerned that many others remain in operation outside the moratorium area. Lane said she is often asked about health concerns associated with fracking, but that “concerns” is a severe understatement. She said the effects are “catastrophic.” “During the boom, water was tainted with toxic chemicals, hazardous waste, runoff from well pads and other spillages,” Lane said.

Sierra Club loses appeal over permit for Enbridge pipeline | (AP) — A federal appeals court has ruled in favor of the government in a dispute over an oil pipeline that runs through a national forest in Michigan’s Oscoda County. The Sierra Club sued the U.S. Forest Service, saying it didn’t prepare an environmental analysis when it renewed Enbridge Energy’s right-of-way permit. But the appeals court on Thursday agreed with a federal judge in Bay City who said the agency wasn’t required to perform an assessment. The 30-inch pipeline is part of an Enbridge line that starts in Wisconsin and ends in Ontario, Canada. The court noted that a biologist found no impact on Kirtland’s warbler birds. The court says the Forest Service’s decision-making process was appropriate and not arbitrary.

New Drilling To Start As Oil Prices Firm Up - In a sign that the U.S. shale industry could spring back to life, one of the top Texas shale companies expects to grow both production and its rig count this year. Pioneer Natural Resources said in an updated 2016 outlook issued in June that it would increase its horizontal rig count from 12 to 17 rigs in the Permian basin in the second half of the year. Pioneer will add the first rig in September, with plans to follow that up with an additional two rigs in each of October and November. Those rigs will begin drilling and see initial production in early 2017. By adding those five rigs, Pioneer expects to see a production growth of 13 to 17 percent next year. That will come on top of the 12 percent growth the company expects this year. The updated outlook comes after several weeks of gains in the total U.S. rig count. The U.S. added 21 rigs between the end of May and mid-June, although the industry removed 7 rigs last week, according to Baker Hughes. Pioneer’s plans, along with the rig data, indicate a slow return of shale drillers to the oil patch. There has been a great deal of speculation whether or not oil rising to $50 would trigger new drilling. The industry won’t come rushing back in a wave, but Pioneer’s decision suggests that at least some companies have an appetite for new drilling at today’s prices. There is also some anecdotal evidence that companies are starting to finish drilled but uncompleted wells in North Dakota, leading to an uptick in hiring for fracking and well completion services. “We are starting to see a definite increase,” Cindy Sanford, a manager at the Williston office of Job Service North Dakota, told the Forum News Service. “It’s not as crazy as it was before, but we’re starting to see some activity.” After thousands of layoffs, companies are hoping to bring back some of their personnel. “We definitely are starting to see a need for some workers,” Sanford said.

Oklahoma Quakes Decline Amid Curbs on Energy Industry’s Disposal Wells - WSJ -- The number of earthquakes in Oklahoma has fallen 25% in 2016 compared with a year earlier, a decline attributed in part to actions by state regulators to police the oil and gas industry’s practice of pumping wastewater from its operations deep underground. The Oklahoma Corporation Commission, which oversees the state’s oil and gas industry, earlier this year stepped up efforts to get companies to reduce the amount of wastewater they inject into hundreds of disposal wells, which have been blamed for a surge in earthquake activity in the state over the past decade. More than 2,700 temblors of magnitude 2.5 or higher occurred in Oklahoma last year, up from 3 in 2005, according to data from the U.S. Geological Survey. So far this year, Oklahoma has had 1,098 quakes of that magnitude—strong enough to be felt by humans— down from about 1,400 over the same period in 2015. While the results represent only a few months of activity, Oklahoma officials and geologists say the state’s efforts appear to be working, and may be starting to reverse the earthquake trend—a development likely to be welcomed by citizens in drilling areas. “Sometime since March or so, it has just slowed way down,” said Jeremy Boak, director of the Oklahoma Geological Survey. “If it slows down much more, we could actually end up with fewer than in 2014.” The oil-and-gas industry, which has faced class-action suits over the quake hazards, has acknowledged the temblor problem, but has said more research is needed to link specific wells to specific incidents. Chad Warmington, president of the Oklahoma Oil & Gas Association, said the local industry has been working with earthquake researchers and regulators to make sure any regulatory decisions are based on solid science. “The directives by the Oklahoma Corporation Commission to reduce wastewater disposal volumes are showing results,” he said.

30 mayors speak out for local control of fracking - - Following the United States Conference of Mayors here this weekend, over 30 mayors from more than a dozen states issued a statement today urging state and federal leaders to uphold local control of drilling. In their statement, the mayors said they opposed moves by both state and federal officials limiting the ability of communities to protect themselves from the harms of industrial fracking. “The growing trend of preemption is alarming,” the mayors wrote. Many of fracking’s impacts – from air and water pollution to earthquakes and ruined roads – are felt more heavily at the local level, prompting over 500 communities across the country to restrict the practice. But the oil and gas industry and their allies in government are fighting back. Last year, a federal court weighed in on local control of fracking for the first time, striking down a fracking ban in Mora County in rural New Mexico. “This notion of local control – that we have the right to come together with our neighbors and make our own choices on issues that threaten our public health or quality of life– is a long-standing American tradition, and we should reject attempts to limit it,” said Mayor Javier Gonzalez of Santa Fe, New Mexico, one of the statement’s signers. The Colorado Supreme Court struck down fracking bans in Longmont and Fort Collins in May. "It's essential that local municipalities have control because local elected officials understand the pulse of their community and voice of their constituents," said Mayor Nicole Nicoletta from Manitou Springs, just outside of Colorado Springs. "Studies have shown the potential negative impacts of fracking and we need to be able to examine that at the local level."

High Levels of Toxins Found in Bodies of People Living Near Fracking Sites: Many of the toxic chemicals escaping from fracking and natural gas processing sites and storage facilities may be present in much higher concentrations in the bodies of people living or working near such sites, new research has shown. In a first-of-its-kind study combining air-monitoring methods with new biomonitoring techniques, researchers detected volatile organic compounds (VOCs) released from natural gas operations in Pavillion, Wyoming in the bodies of nearby residents at levels that were as much as 10 times that of the national averages. Some of these VOCs such as benzene and toluene are linked to chronic diseases like cancer and reproductive and developmental disorders. Others are associated with respiratory problems, headaches, nosebleeds, and skin rashes. "Many of those chemicals were present in the participants' bodies at concentrations far exceeding background averages in the US population," notes the study, titled "When the Wind Blows: Tracking Toxic Chemicals in Gas Fields and Impacted Communities," which was released last week. Some residents of Pavillion have for years been concerned about the rise in health issues that they suspected were connected to emissions from the gas production activities. This tiny town of less than 250 people has been at the center of the growing debate on fracking since 2008 when locals began complaining that their drinking water had acquired a foul taste and odor back in 2008. In 2014, air monitoring data showed some toxic chemical emissions at oil and gas sites in Wyoming were up to 7,000 times the "safe" levels set by US federal environmental and health agencies. In March of this year, Stanford University researchers found evidence that fracking operations near Pavillion were contaminating the local groundwater.

BLM poised to OK 5,750 new wells for Utah oilfield -- The Bureau of Land Management last week wrapped up a six-year environmental analysis of a massive infill drilling program for the Uinta Basin's Monument Butte unit, which holds the state's largest proven oil reserves. Under the BLM's preferred alternative, Newfield Exploration Co. would, over a period of 16 years, drill all 5,750 oil and gas wells it proposed. That plan relies on directional drilling to reduce the project's footprint in an already affected field covering 119,000 acres south of Myton. The infill project is needed to recover remaining oil and gas with new wells and by injecting water into hydrocarbon-bearing formations to coax further production over the 40- to 50-year life of the project. Utah's largest oil producer, Newfield already operates about 3,400 wells there, on 40-acre spacings. By drilling many new wells from existing pads, the infill project would concentrate its impacts to spots already served by existing roads and pipelines. These provisions are needed to protect habitat and the Pariette Wetlands. The project area contains no sage grouse areas that the BLM has recently identified for special protections, but it does harbor two species of rare cactus as well as prairie dogs. The preferred alternative identified in the Environmental Impact Statement (EIS) would still allow for 10,122 acres of additional surface disturbance, enabling Newfield to develop 226 miles of new roads and pipelines; build 21 new compressor stations and expand three others; and construct a gas-processing plant, 13 water treatment and injection sites, 12 gas and oil separation plants and six water pump stations. The infill project is expected to yield 335 million barrels of oil and 540,669 million cubic feet of natural gas from the Green River formation and nearly 7 trillion cubic feet from "deep gas development" through 2035, according to the EIS. Utah officials called the project one of the single largest investments in Utah, bringing between $19 billion and $35 billion, but they were critical of the first draft of the EIS, released in 2013. That version called for more directional drilling and a lot fewer new roads.

Environmental groups plan appeal of US fracking decision as debate swirls over impact - Environmental groups said Monday they will appeal a federal judge's decision to overturn the Obama administration's rules over hydraulic fracturing, a ruling an attorney for these groups said will have far-reaching impacts over future regulation of US oil and gas operations. The ruling, which US District Court of Wyoming Judge Scott Skavdahl issued last week, could make many of the existing regulations over fossil fuel production illegal and could severely hinder any future oversight of oil and gas operations, according to Mike Freeman, a Colorado-based attorney with Earthjustice. "This is really just a long overdue update to the [US Interior Department's Bureau of Land Management's] oil and gas rules," Freeman said. "It's not some improper power grab." Freeman is representing several environmental groups, including the Sierra Club, Western Resource Advocates and Southern Utah Wilderness Alliance, who filed notice Monday with the US Court of Appeals for the 10th Circuit that they were appealing Skavdahl's ruling. The Obama administration on Friday filed notice that they were also appealing the ruling. "Obviously we disagree with the decision," Jessica Kershaw, an Interior spokeswoman, said in a statement Monday. "The fracking standards reflect today's industry practices and are aimed at ensuring adequate well control, preventing groundwater contamination, and increasing transparency about the materials used in the fracturing process. The standards are well within BLM's statutory responsibility to protect our public lands, and ensure that oil and gas operations are conducted safely and responsibly on those lands."

U.S. hardens royalty rules on fossil fuel production | Reuters: The Obama administration on Thursday completed new rules for how energy companies value oil, gas and coal extracted from federal land in a reform meant to protect taxpayers' stake in those sales. The Interior Department updated the valuation rules that were first enacted in the 1980s and have not been significantly changed in over a decade. They were completed Thursday after four years of public engagement. "These improvements were long overdue and urgently needed to better align our regulatory framework with a 21st century energy marketplace, offering a simpler, smarter, market-oriented process,” Interior Secretary Sally Jewell said in a statement. Jewell said the new oil, gas and coal valuation update is a key part of the administration's reform agenda to improve the transparency and accountability of the federal coal program. The rule expects companies to pay royalties on sales to the first unaffiliated customer, known as an arm's-length sale, as the fuel moves to market. This better reflects the market value of the coal, oil or gas extracted than situations when energy companies sell to affiliates, officials have said. “This valuation rule is important because it ensures, in part, that our federal coal program is properly structured to obtain all revenue due to taxpayers,” Jewell said.

Public Lands Development Rigged in Favor of Oil and Gas --A staggering 90 percent of our public lands and minerals managed by the Bureau of Land Management (BLM) are open to oil and gas leasing due to fundamental flaws in the BLM’s policies, according to a new report from The Wilderness Society. The No Exit report shows that regardless of conservation value or potential energy resources, the Bureau of Land Management automatically places our public lands on the highway to oil and gas leasing. Instead of seeking to preserve some of the nearly 250 million acres of public lands and 700 million acres of subsurface mineral resources owned by the American people, the agency relies on outdated and unbalanced policies and defaults to managing public lands for energy development. This directly conflicts with the BLM’s own guiding principle that some lands, especially those with low potential energy resources, be managed for conservation, wildlife habitat and recreation. Currently, nearly 32 million acres of BLM lands are leased for oil and gas development, including areas that do not contain oil and gas. Lands under lease remain unavailable for any other use, even when they are not actively under development. And the majority of these leased lands—60 percent—remain undeveloped due to oil and gas companies hoping for future profits if energy prices rise or the land could be sold.

North Dakota adopts rules to reduce oil industry spills (AP) — North Dakota regulators on Wednesday adopted new rules aimed at reducing spills in the state’s oil patch, despite objections by the industry. The state Industrial Commission approved the rules that include bonding and third-party inspections of gathering pipelines that carry briny oilfield wastewater. Another new rule requires berms at least 6 inches high be built around existing and future well sites to keep oil and saltwater spills from spreading. The North Dakota Legislature last year directed the Industrial Commission’s Oil and Gas Division to draft new rules. The action came in the wake of a 3-million gallon saltwater pipeline leak near Williston in western North Dakota that regulators said was the biggest such spill to occur in the state. Saltwater is a naturally occurring, unwanted byproduct of oil and natural gas production that is many times saltier than sea water. The briny liquid also may contain petroleum and residue from hydraulic fracturing operations. North Dakota oil companies have opposed the rules, saying that adding more regulations adds costs to companies that already are dealing with depressed crude prices. Lynn Helms, director of the state Department of Mineral Resources, said public hearings on rules were done in several cities in April. Helms’ agency regulates the state’s oil and gas industry and is overseen by the Industrial Commission, an all-Republican panel whose members are Gov. Jack Dalrymple, Attorney General Wayne Stenehjem and Agriculture Commissioner Doug Goehring.

Washington Gov. Jay Inslee Asks Union Pacific To Halt Oil Trains . News | OPB: Gov. Jay Inslee asked the Union Pacific Railroad on Friday to halt oil train shipments through Washington until the company does more walking inspections of its railroad track. Inslee joins Oregon Gov. Kate Brown, who has repeatedly called for a moratorium on oil train traffic after a fiery oil train derailment in Mosier, Oregon, on June 3. Union Pacific said it will continue operations. “We are required to transport crude oil and other commodities for our customers, as long as the customers deliver those packaged in conformity with U.S. Department of Transportation requirements,” said Union Pacific Spokesman Justin Jacobs in response to Inslee’s statement.Federal regulators blamed Union Pacific for the 16-car derailment, saying the railroad failed to maintain its track. Union Pacific had inspected the track in Mosier before the derailment, but failed to find multiple broken bolts that led to the crash. In a report Thursday, the Federal Railroad Administration said inspections done by walking instead of driving are a more effective method of detecting rail defects like broken bolts. “A moratorium should be placed on any oil trains in Washington using track that is not inspected to these rigorous standards,” Inslee said in a press release. “I will continue pressing federal regulators and the railroads for swift action.”

In California, Study Finds Drilling and Fracking into Freshwater Formations -- In California's farming heartland, as many as one of every five oil and gas projects occurs in underground sources of fresh water, according to a new study published Monday in the Proceedings of the National Academy of Sciences. The study by Stanford scientists assessed the amount of groundwater that could be used for irrigation and drinking supplies in five counties of California's agricultural Central Valley, as well as the three coastal counties encompassing Los Angeles, Santa Barbara and Ventura. The study estimated that water-scarce California could have almost three times as much fresh groundwater as previously thought. But the authors also found that oil and gas activity occurred in underground freshwater formations in seven of the eight counties. Most of the activity was light, but in the Central Valley's Kern County, the hub of the state's oil industry, 15 to 19 percent of oil and gas activity occurs in freshwater zones, the authors estimated. The overlap of oil and gas development and underground freshwater formations underscores the vulnerability of California's groundwater, and the need for close monitoring of it, the authors said."We don't know what effect oil and gas activity has had on groundwater resources, and one reason to highlight this intersection is to consider if we need additional safeguards on this water,". The study arrives as California grapples with the possible impact of past oil and gas activity on its groundwater resources and the push to develop new fossil fuel reservoirs through hydraulic fracturing, or fracking. In 2014, state officials admitted that for years they had allowed oil and gas companies to pump billions of gallons of wastewater into more than 2,000 disposal wells located in federally protected aquifers. In 2015, Kern County officials found hundreds of unlined, unregulated wastewater pits, often near farm fields. Oil and gas wastewater is highly saline and laced with toxic substances, such as the carcinogen benzene.

Earthquake Dangers at Diablo Worsened by Fracking - We know that both onshore and offshore hydraulic fracturing or “fracking” is the process of drilling and injecting a high-pressure mixture of fracking fluid at subterranean rock to release the shale gas, tight gas, and tight oil inside the earth. The highly pressurized toxic liquids used in fracking can start earthquakes by lubricating preexisting faults deep underground. This allows masses of rock to slide past each other. Both the U.S. Army and the U.S. Geological Survey have concluded that the practice of injecting pressurized water into deep rock formations causes earthquakes. Unfortunately, the federal government just lifted a moratorium on 19 offshore fracking platforms in the Santa Barbara Channel. The Hosgri fault, which is located in the southern part of the San Gregorio-Sur-San Simeon-Hosgri fault system, is truncated against or merges with the faults in northwestern Santa Barbara Channel. The problem is that offshore hydraulic fracturing in the Santa Barbara Chanel could trigger a meltdown at the aging and brittle Diablo Canyon Nuclear power plant. In 1812, the Santa Barbara Channel magnitude 7 earthquake produced five tsunami waves in front of the Santa Barbara Presidio. The USGS estimated the largest wave was about 50 feet high. The Diablo Cove Fault, which runs east to west directly under the Diablo Canyon nuclear plant’s Unit One Reactor and turbine building, cuts across the seismically active Shoreline Fault. The Diablo Cove Fault, the Shoreline Fault, the Hosgri Fault, and the San Andreas Fault are all seismically linked, and the power stored within the combined network of fault systems could create an earthquake sufficient to exceed Diablo Canyon’s safeguards.

First Alaskan North Slope Crude Export Planned for Nicaragua - Alaskan North Slope (ANS) crude will be shipped to Nicaragua for the first time in July, underscoring a shift in oil flows to and from the U.S. West Coast. Global crude flows have changed in the last six months as oversupplied markets force producers to compete aggressively on price. The United States in December lifted a four-decade ban on exporting crude, giving global refiners access to a wider variety of crude. ANS, which was exempted from the U.S. export ban, is almost exclusively sold to West Coast refiners and transported on U.S. flagged vessels owned by BP Plc, Exxon and ConocoPhillips that comply with maritime law. The rare cargoes that have moved abroad in recent years have gone to South Korea or Japan. In March, Trafigura took 380,000 barrels of West Texas Intermediate (WTI) crude at its Puma refinery in Nicaragua. Trafigura has a stake in Puma Energy, which operates a small refinery in Managua, Nicaragua, and manages downstream assets in 47 countries.

New Panama Canal Locks No Game-changer To Americas Crude Flows -- Interest in the expanded Panama Canal is tepid among US Gulf Coast and Caribbean dirty tanker market participants, as draft restrictions make large Aframaxes the largest tanker able to transit its new lock system, and they are unlikely to leave their lucrative home markets for what looks like little gain in freight savings. Shipowners are taking a wait-and-see approach about the effects of the canal’s expansion. “It’s not going to be a game-changer, because you won’t be able to get the bigger ships through,” one said. “You can only get a partially laden Suezmax through.” Although a Suezmax could not make the transit fully loaded with crude, a ship could go through with a full load of condensate. With the opening of the expanded lock system on June 26, vessels of 1,200 feet (366 meters)in length and a beam of 160.7 feet (49 meters) can transit. Those dimensions would accommodate a typical Suezmax tanker. Currently, the Panama Canal’s locks allow ships of up to 965 feet (294.1 meters) long and 106 feet (32.3 meters) wide to make the transit. But, draft is an issue. The depth of the canal’s present configuration will allow a maximum draft of 39.5 feet (12.04 meters). That increases to 49.9 feet (15.2 meters) with the expansion. Suezmaxes typically draw 53 feet (16.15 meters) of draft, which would exclude them from making the transit with a full load of crude. A drought has compounded the draft issue, however. Due to low water levels, the Panama Canal Authority has imposed some draft restrictions.

Big Oil: From black to green -- The short-term crisis for oil companies has been the slump in crude prices over the past couple of years, triggered by the US shale boom. In the longer term, the more fundamental challenge is a potential move away from oil that would hold down prices indefinitely. Paul Spedding of the Climate Tracker Initiative, a think-tank that works on the financial risks of climate change, says investors can face large losses when companies invest in “stranded assets” that cannot be developed at a profit. “That is the real risk climate change poses for the industry: over-investment, followed by oversupply, followed by value destruction via price,” he says. At least in their rhetoric, there is a divide between US and European companies in their stance on climate change. BP, Shell, Total and Statoil of Norway signed a statement before the Paris talks saying they were “committed to playing our part” in keeping the rise in global temperatures below the internationally agreed limit of 2C. The largest American oil groups, however, were not on that list. “We thought that Exxon and Chevron might sign up to things like this, but then do very little about it,” says one executive at a major European oil company. “But they haven’t even done that.” The US companies do not deny that global warming is a threat. “We know the risks of climate change are real, and governments will and should take reasonable steps to address those risks,” says Bill Colton, vice-president of corporate strategic planning at Exxon. But he adds, “each government is limited in what it can do, and they might not go as far as some people would like”. That means Exxon expects demand for fossil fuels can continue to grow. It projects that total world energy demand will grow by about 25 per cent in the next 25 years, compared to 59 per cent growth in the past 25, in part because climate policies will drive increased energy efficiency.

Big Oil Faces US$2 Trillion Cash Shortage – Deloitte -- A report by consultancy Deloitte has revealed that the oil and gas industry may find itself unable to improve its reserves replacement rate and overall performance over the next five years due to a huge shortage of cash of as much as US$2 trillion. Deloitte notes in the report that oil and gas exploration and production is a capital-intensive industry, and a lot is necessary to just stay afloat. With all the budget cuts that this industry has seen over the last two years, staying afloat has become challenging, not to mention any growth, said Deloitte vice chairman John England. The report was based on a survey of integrated public and listed national companies as well as independent E&Ps and warned that things are not looking particularly good. The rate of well depletion is 7-9 percent annually for both traditional and shale wells, and spending at many of the companies surveyed has been cut to below the necessary minimum that would ensure that this depletion is being offset, England noted.Findings in the area of capital spending are also grim. Outside the Middle East and North Africa, capex in the exploration and production business dropped by a quarter last year and is expected to fall by a further 27 percent this year. Debt maturing over this and the next four years totals US$590 billion, the report pointed out, and dividend payouts are estimated at around US$600 billion. In order to cope with these payments, E&Ps will need more than US$4 trillion, which they won’t have if oil prices don’t start rising above US$50 a barrel.

Canada court overturns approval of Enbridge oil pipeline (AP) — Canada’s Federal Court of Appeal has overturned the previous government’s controversial approval of a pipeline proposal that would bring oil to the Pacific Coast for shipment to Asia. In a ruling released Thursday, the court said the former Conservative government did not adequately consult aboriginal communities regarding their traditional territory or accommodate their concerns. “It would have taken Canada little time and little organizational effort to engage in meaningful dialogue on these and other subjects of prime importance to Aboriginal Peoples. But this did not happen,” said the ruling. Canada’s former Conservative government in 2014 approved Enbridge Inc.’s US$6.11-billion (CA$7.9-billion) Northern Gateway pipeline project, which would carry oil from the Alberta oil sands to a port in northern British Columbia for export. Its construction was subject to more than 200 conditions. After the approval, numerous British Columbia aboriginal communities, along with environmental groups, filed lawsuits seeking to overturn the decision. The court on Thursday sent the matter back to Prime Minister Justin Trudeau’s cabinet for “prompt redetermination.” Northern Gateway president John Carruthers said that while the matter has been remitted to the federal government for their redetermination, Northern Gateway will consult with aboriginal equity partners and its commercial project proponents to determine the next steps.

TransCanada formally seeks NAFTA damages in Keystone XL rejection - TransCanada Corp. is formally requesting arbitration over U.S. President Barack Obama's rejection of the Keystone XL pipeline, seeking $15 billion US in damages, the company said in legal papers dated Friday. TransCanada submitted a notice for an arbitration claim in January and had then tried to negotiate with the U.S. government to "reach an amicable settlement," the company said in files posted on the pipeline's website. "Unfortunately, the parties were unable to settle the dispute."TransCanada said it then filed its formal arbitration request under North American Free Trade Agreement provisions, seeking to recover what it says are costs and damages. The Keystone XL was designed to link existing pipeline networks in Canada and the United States to bring crude from Alberta and North Dakota to refineries in Illinois and, eventually, the Gulf of Mexico coast. Obama rejected the cross-border crude oil pipeline last November, seven years after it was first proposed, saying it would not make a meaningful long-term contribution to the U.S. economy. TransCanada is suing the United States in federal court in a separate legal action, seeking to reverse the pipeline's rejection.

US ethane exports to Asia, Latin America about to pop. Canadian ethylene plants have been receiving U.S.-sourced ethane by pipeline for two and a half years now, and waterborne ethane exports from Marcus Hook, PA to Norway started earlier in 2016. Soon the real fun will begin, when Enterprise Products Partners initiates (and quickly ramps up) ethane exports from a new, 200 Mb/d terminal on the Houston Ship Channel at Morgan’s Point. The destinations of the ships leaving Morgan’s Point are likely to be places like India, Brazil, Europe, and maybe even Mexico. Today, we consider the imminent bump-up in U.S. ethane export capacity, the international markets ethane will be headed to in the near-term, and the longer-term question about how much ethane exports can grow. Just a few years ago, before the Shale Revolution, the thought that sometime soon the U.S. would be piping significant volumes of ethane to Canada and floating ship after refrigerated ship of the lightest natural gas liquid (NGL) to European ethylene plants (steam crackers) would be dismissed as nothing short of crazy. But here we are. As shown in Figure 1 (left graph), ethane exports to Canada via the Mariner West and Vantage pipelines ramped up from zero in 2013 to average 38 Mb/d in 2014, 65 Mb/d in 2015 and almost 80 Mb/d so far this year. Oceangoing ethane exports started on March 9 of this year when the JS Ineos Intrepid departed Marcus Hook with 175 Mbbl of ethane headed for INEOS’s cracker at Rafnes, Norway. Since then about 16 Mb/d of ethane has moved out of Marcus Hook, with 22 Mb/d exported in May (Figure 1, right graph).

working natural gas stocks hit a new record for the first week in June: over the 3 trillion cubic foot mark -- that's storage! -- storage hit 3 Tcf during the first week in June -- earlier in the refill season (April 1- October 31) than ever before

the record set back in 2012 was erased

comparable to 2012, working gas stocks entered the refill season this year (2016) at a record high level, totaling 2.492 Tcf on March 31, 2016. That was 19 Bcf above the record set in 2012

the EIA uses the phrase "considerably higher" to say where we are now compared to 2012 (the previous record year)

despite this huge injection, total natural gas during this same period has exceeded both year-ago and 2012 levels -- a trend driven by power-sector consumption

power burn: 26 Bcf/d; 10% greater than a year ago; 5% greater than 2012

exports: to Mexico have more than doubled since 2012 to 4 Bcf/d; LNG up to 0.5 Bcf/d from negligible in 2012

natural gas production has slowed in all seven of the shale-producing regions

UK's Brexit vote leads to bearish impact on LNG as currencies weaken - The UK's Brexit vote is expected to have a bearish effect on the global LNG market due to the weakening of European currencies, several trading sources said Friday. News of the UK's decision to leave the EU on Friday caused both the pound and the euro to weaken against the dollar, the currency in which LNG is traded. This in turn has reduced the value that regasified spot LNG at western European gas hubs, which have traditionally been considered as a pricing floor for the global LNG market. The UK's National Balancing Point is often used as a reference for the relative value of spot LNG transactions, with prices at the Dutch Title Transfer Facility also used as relative marker.At close of business Friday, the Platts assessed NBP forward contract for July had lost 4.9% of its value in dollar-denominated terms day on day, moving from $4.934/MMBtu on June 24 to $4.694/MMBtu June 25. In pound terms, however, the value of the July contract gained 3.9% or 1.3 pence to close at 34.55 pence/therm. In the case of TTF, in dollar terms the Platts assessed July forward contract lost 5.26% of its value between Thursday and Friday, moving from $5.056/MMBtu to $4.790/MMBtu. The change in terms of euros, which the TTF is traded in, was a more modest loss of 3.29%.

Earthquakes Cause Giant Natural Gas Field To Cut Production By 44% --Europe just lost a big chunk of production from one of its most critical natural gas fields, and not for any of the usual reasons — technical problems, pipeline constraints, or terrorist disruptions. These cuts are due to earthquakes. The development came at the Groningen natgas field in the Netherlands. The largest producing field in Western Europe — and one of the world’s top 10 gas fields by size. Groningen’s massive size has been an issue lately though, with drawdown from the field having caused seismic events in the areas above and surrounding the field. Such concerns prompted the Dutch government to take action Friday. With the country’s Economics Minister Henk Kamp saying that regulators will reduce Groningen’s permitted output by 11.1 percent — to 24 billion cubic meters per year (850 billion cubic feet), down from a previous allowance of 27 billion cubic meters. Minister Kamp also said that the reduced production quota will stay in effect for the next five years. This means that Europe has lost a significant slice of its go-to production for the foreseeable future. This latest production cut continues a dramatic slide in Groningen’s output over the past 18 months. With the Dutch government deciding in early 2015 to cut production from 42.5 billion cubic feet annually to 39 billion cubic feet — and then further reducing the quota to 33 billion cubic feet just a few months later.

Chile Just Gave Cheniere a Big Reason to Build Another LNG Plant - - Chile this week gave Cheniere Energy Inc. a good reason to build another plant to export U.S. natural gas by clearing the final environmental hurdle for a proposed floating import terminal.Approval was granted for the Penco Lirquen LNG project, which comprises a floating storage and regasification unit, Juan Jose Gana, executive director of Biobiogenera SA, the developer behind the project, said in an e-mail Thursday. The 1,200-megawatt Central El Campesino power plant, which will be supplied by the gas import vessel, “should be approved” in July or August, he said. This approval marks a milestone for Cheniere, which has a 20-year agreement to supply gas to the power plant. Cheniere is also a co-owner of the LNG import project with Biobiogenera, according to Hoegh LNG Holdings Ltd., which is building the terminal.Success in Chile may help Cheniere find other new buyers needed to sign long-term contracts before it makes a decision on an additional liquefaction plant at its Corpus Christi facility in Texas, according to Energy Aspects Ltd. and Hennessy Funds.“This a positive development for U.S. exports,” Alex Tertzakian, an analyst with Energy Aspects in London, said by e-mail Thursday. Although the contract to supply the terminal and the connected power plant “is relatively small volume-wise,” the latest developments will “undoubtedly increase the chances” of Cheniere moving ahead with building the third liquefaction plant at Corpus Christi, he said. Although it got the environmental nod, the project has stirred up controversy in the local community. Police used a water cannon to break up protests in the Chilean city of Concepcion on Tuesday after the regional environmental commission unanimously approved the LNG project, Radio BioBio reported on its website.

Too Much, Too Little, Too Late - Competition, Low Prices Unsettling the LNG Market - The international market for liquefied natural gas (LNG) is in the midst of a wrenching transition. The old order, founded largely on long-term, oil-indexed contracts that called for certain volumes of LNG to be delivered by specified Point A to specified Point B, is being replaced by a new order characterized by intense competition among suppliers, new sources of supply (and demand), a glut of liquefaction capacity expected to last at least a few years, more spot purchases, and contracts incorporating destination flexibility—and, for many, tied to natural gas (not oil) prices. Today, we continue our exploration of the industry’s fast-changing dynamics with a look at the fierce battle now under way among LNG suppliers for market share, and at new approaches to pricing LNG. As we said in Episode 1, only eight years ago U.S. natural gas prices were spiking, domestic gas production was declining, and much of the market was anticipating a boom in LNG imports to the U.S. from Qatar and other major suppliers. Now, pipelines are being reversed to bring gas from the Marcellus and Utica basins to Gulf Coast to be super-cooled into LNG, and LNG from the first liquefaction/LNG export facility in the Lower 48 (Train 1 at Cheniere Energy’s Sabine Pass in southwestern Louisiana) is being shipped to overseas buyers. (Train 2 at Sabine Pass is in the process of being started up.) But the market expectations on which the development of new liquefaction capacity at Sabine Pass, Cameron LNG, Corpus Christi LNG (another Cheniere project), Freeport LNG, and Dominion’s Cove Point were founded have been shaken to their core. Recent spot prices for LNG (around $5/MMBtu—75% lower than where prices stood two and a half years ago) suggest that the world is awash in LNG. Worse yet, it is possible (but by no means certain) that during the 2016-20 period worldwide liquefaction capacity (for super-cooling/condensing natural gas into very transportable LNG) will rise to 448 million tons per annum (MTPA) from the 308 MTPA online at year-end 2015, a 45% increase in less than five years.

NYMEX August gas settles at $2.924/MMBtu, up 6.1 cents - Natural Gas | Platts - The NYMEX August natural gas prompt-month contract jumped 6.1 cents to settle at $2.924/MMBtu, its highest close since August 12, 2015, on bullish weather reports and a below-average injection reported by the US Energy Information Administration. The August contract traded in range of $2.851/MMBtu to $2.945/MMBtu. According to the EIA's weekly gas storage report, a net injection of 37 Bcf was reported for the week ended June 24, including a non-flow-related adjustment that decreased working gas stocks by about 5 Bcf. This injection falls below the 46 Bcf expected by a consensus of analysts surveyed by S&P Global Platts and was below last year's 73-Bcf injection and the five-year average of 78 Bcf, boosting prompt-month prices.Additional upward pressure on prices came from a projected tightening of the supply-demand balance. Platts unit Bentek Energy projected total US demand to reach 66.7 Bcf/d over the next seven days amid bullish weather reports, almost 2 Bcf/d higher than the June month-to-date average, while total US production is expected to sit around 70.1 Bcf/d, about 400 MMcf/d lower than the June month-to-date average and almost 2 Bcf/d lower than June 2015. Weather will continue to be a driver for the prompt-month contract. According to Phil Flynn, senior market analyst at Price Futures Group, "we haven't seen the worst heat wave yet. July is expected to be a scorcher." If this weather projection comes to fruition, it will give a fair amount of momentum to the prompt-month contract, Flynn added.

US Gas Futures Head for Best Second-Quarter Gain in 16 Years | Rigzone - - U.S. natural gas futures headed for the best second quarter since 2000 after a government report showed a smaller-than-forecast stockpile gain that reflected a revision to West Coast supplies. Gas inventories rose 37 billion cubic feet after the Pacific region reclassified 5 billion cubic feet from working gas, or stockpiles that can be withdrawn and sent to customers, and instead tagged it as gas needed to maintain adequate storage pressure. That made the implied flow for the week 42 billion. Analysts had predicted an increase of 45 billion. The inventory surplus narrowed for a twelfth straight week, according to the U.S. Energy Information Administration data. Prices have surged 81 percent from a 17-year low in March as hot weather boosts demand for electricity generation, eroding the supply glut. Production disruptions from flooding in West Virginia and an explosion at an Enterprise Products Partners LP gas plant in Mississippi are also limiting supplies. "The supply declines have been greater than anticipated by the market,” said Teri Viswanath, managing director of gas at PIRA Energy Group in New York. "The market wants to look at the winter, but there’s still enough moving parts in the injection season alone that it should pose a question at whether the arrival at the three-dollar mark is premature." Futures for August delivery rose 4.9 cents, or 1.7 percent, to $2.912 per million British thermal units at 2:10 p.m. on the New York Mercantile Exchange after the release of the EIA inventory report. Gas is on course to gain 49 percent this quarter. Temperatures may be broadly warmer than normal in the contiguous U.S. from July 10 through July 14, with the West hotter than previously expected, according to MDA Weather Services.

Cedigaz: Global gas demand to rise 1.6%/year over 2014-35 - Oil & Gas Journal --Worldwide natural gas demand is expected to rise 1.6%/year during 2014-35, driven by emerging markets, electric power generation, and industry, according to a recent outlook from Cedigaz. In its Medium and Long-Term Natural Gas Outlook 2016, the international gas association highlights the increasing role of gas as a bridge fuel towards a longer-term, increasingly renewables-based energy system.Cedigaz noted that political action is needed to promote coal-to-gas switching worldwide, given the vast low-cost coal resources. The trajectory of Cedigaz’s scenario is based on the assumption that energy-related carbon dioxide emissions increase an average of 0.3%/year, reaching almost 35 Gt over 2030-35. “Looking forward to 2035, the total primary energy consumption is forecast to grow at a moderate rate of 1%/year in a context of increased energy efficiency. In this context, gas stands as the fastest-growing fossil fuel over 2014-35 (+1.6%/year). In contrast, the growth of oil and coal is expected to slow sharply, with respective annual rates of 0.2% and 0.1%.” Cedigaz said. Gas will therefore increase its relative share in the global primary energy supply to 23.9% in 2035 from 21.4% in 2013. However, the pace of gas demand growth has been revised downwards compared with the association’s Outlook 2015. Intended Nationally Determined Contributions (INDCs) ahead of Conference of Parties (COP21) have been taken into account, meaning greater efforts to meet environmental goals via the deployment of renewables and increasingly efficient technologies.Also, according to the Outlook 2016, virtually all of the additional energy is consumed in emerging economics and 85% of gas growth comes from emerging economies. The US is the only industrialized market to record a significant growth in gas consumption in volume terms, thanks to the competiveness of shale gas and the adoption of the Clean Power Plan.

Gazprom H1 gas exports to Europe up 14% year-on-year: CEO - Gazprom's gas sales in Europe in the first half of 2016 rose by 14.2%, or 10.6 Bcm, compared with the same period of last year, Gazprom CEO Alexei Miller said Thursday, signaling a sharp slowdown in export growth in the second quarter of this year. Addressing Gazprom's annual general meeting in Moscow, Miller also hailed the utilization rate of Russia's Nord Stream gas pipeline to Europe, which, he said, far outweighed that of LNG imports. Speaking of Gazprom's supplies to Europe and Turkey in the first half, Miller provided no absolute figures. But according to Platts' analysis of Gazprom data, a 10.6 Bcm increase on the 74.3 Bcm sold in Europe and Turkey (excluding the former Soviet Union states) in the first half of 2015 means H1 2016 sales of 84.9 Bcm. This puts Gazprom well on track to reach its most recently stated target from May of total exports to Europe and Turkey in 2016 of 165 Bcm. However, the 10.6 Bcm increase in the first half confirms that the growth in Gazprom's gas sales to its core foreign markets stalled in the second quarter after strong growth at the start of the year.

Overseas Fracking Operation Finds Wastewater Solution In The Sea - Fracking is not just an issue facing different cities around the United States, but one that has become a large problem overseas. As a result, a UK shale gas company is considering dumping wastewater from fracking in the sea. Ineos, which owns the Grangemouth refinery and holds 21 shale licenses, many in the northwest, North Yorkshire, and the east Midlands, has said it wants to become the biggest player in the UK’s nascent shale gas industry according to The Guardian.In North Yorkshire, where councilors gave the go-ahead to a fracking application by another company in May, a senior executive said in an email that water produced during fracking could be discharged in the sea after being treated. “We will capture and contain it, treat it back to the standards agreed… with the Environment Agency and discharge where allowed under permit, most likely the sea,” Tom Pickering, director for Ineos Shale, wrote in the email. People who are living near prospective sites have highlighted the potential environmental impacts of fracking, such as contamination of water supplies, minor tremors, and local air pollution reported The Guardian. Under the Environment Agency (EA) regulations, the water used for fracking must be treated on site or elsewhere at a “designated treatment facility,” before a permit is issued to discharge it. Ineos added that any fracking wastewater would be treated before being disposed of.

Chevron Deadline Nears For $40B Bet On Next Decade's Oil - -- Chevron Corp. may shortly give a green light to the most expensive oil project in the world this year as the industry digs out from the worst slump in a generation. The company said this week in a presentation on its website that the decision on expanding the Tengiz development in Kazakhstan will be made in mid-2016. Installing 4,500 camp beds for construction crews is done and port dredging 25 percent complete, it said. The project may cost as much as $40 billion and add crude supply equivalent to that of Libya. The investment was put on hold last year after cost estimates ballooned amid plunging oil prices. In a May interview, Kazakh Energy Minister Kanat Bozumbayev predicted a late-June approval and estimated the cost at $36 billion to $37 billion. Wood Mackenzie Ltd. said it could reach $40 billion. Chevron spokesman Kurt Glaubitz declined to comment on the pace of the Chevron board’s deliberations or the projected price tag.The Tengiz expansion would come after oil explorers around the globe slashed more than $1 trillion in investments to weather a downturn that saw U.S. crude tumble 75 percent from June 2014 to last February. Hundreds of thousands of drillers, engineers and geologists were fired and the contagion spread to steel mills, trucking and lodging companies. The project represents a bullish bet that oil demand will continue to grow through the next decade and beyond, according to IHS. For Chevron, the squeeze meant writing off hundreds of millions of barrels of deepwater discoveries in the U.S. Gulf of Mexico and elsewhere. The San Ramon, California-based explorer slashed annual spending plans for 2017 and 2018 to between $17 billion and $22 billion each year, a reduction of about 26 percent from this year. Chevron’s 50 percent ownership interest in Tengiz means it has more at stake than its partners: Exxon Mobil Corp., Kazmunaigaz National Co. and Lukoil PJSC. The field already accounts for almost one-fifth of Chevron’s worldwide oil production.

Argentina oil workers go on strike, warn of longer walkout - Oil workers in much of Argentina launched a 48-hour strike Monday, with a labor union saying the action could be extended if demands for higher wages are not met. If oil producers and services companies do not agree to increase wages by at least 30% before the end of Tuesday, the strike will continue through Wednesday, Jorge Avila, secretary general of the Union of Private Oil and Gas Workers in Chubut, said in a statement over the weekend. If there is still no response by the end of Wednesday, then the walkout will go on "indefinitely", he said. The strike had originally been planned for much of Patagonia, a southern region that produces most of the country's oil and natural gas. But it gained adherence by unions elsewhere in the region as well as in the northwestern province of Salta, according to the statement. This means the strike is affecting about 99% of Argentina's 530,000 b/d of oil production and 88% of its 123 million cu m/d of gas, according to data from industry group Argentine Oil and Gas Institute.

Venezuela’s Oil Output Decline Accelerates as Drillers Go Unpaid -- Venezuela’s oil output, already the lowest since 2009, is set to slide further this year as contractors scale back drilling after the cash-strapped country fell more than $1 billion behind in payments. The Latin American nation’s oil production, which generates 95 percent of export revenue, will decline by about 11 percent to 2.1 million barrels a day by the end of the year, Barclays Plc estimates. Output is falling largely because oil-services companies aren’t being paid, according to the International Energy Agency. Venezuela’s economy has been in crisis since crude prices slumped, with sporadic looting as the desperate population fights for food and other essentials. President Nicolas Maduro has pledged to continue payments to bondholders, while the partners of state-run oil company Petroleos de Venezuela SA, known as PDVSA, aren’t paid. Further output decline in the OPEC nation, combined with disruptions in fellow members Nigeria and Libya, could leave the oil market short of supply next year. “The situation is becoming more and more difficult for oil services in Venezuela,” As long as oil prices are at current levels, it’ll be “very difficult” for PDVSA to pay the contractors, he said. Schlumberger Ltd., the world’s largest oil-services company by market value, was owed $1.2 billion by PDVSA as of March 31, according to an April 27 filing. Halliburton Co. said last month the amount it was owed rose 7.4 percent in the first quarter to $756 million. The number of rigs drilling for oil in Venezuela fell by 10 to 59 in May, the lowest level in more than a year, according to Baker Hughes Inc. Schlumberger has reduced activity in line with the drop in payments, the company’s president, Patrick Schorn, told investors. It still works in the country and could boost operations if “new payments models” are implemented, he said.

Follow-Up To The Stranded BP Tanker -- June 29, 2016 Does anyone remember this story from June 1, 2016? - Reuters reporting: Four tankers carrying over 2 million barrels of U.S. crude are stuck at sea and cannot discharge at a Caribbean terminal because Venezuela has not yet paid supplier BP. The cargoes are part of a tender [Venezuela] awarded in March to BP and China Oil. The deal was to import some 8 million barrels of West Texas Intermediate (WTI) crude so Venezuela could dilute its extra heavy crudes and feed its Caribbean refineries. So, how did that turn out? Reuters reports that a "swap" resolved the issue: Britain's BP Plc this month received a Venezuelan crude cargo from state-run PDVSA, the first since the companies agreed on a swap arrangement to settle pending payments for U.S. oil shipments. BP and China Oil won a tender launched by PDVSA in March to be supplied with U.S. and African light oil during the second quarter of this year. The light oil is needed to dilute Venezuela's extra heavy output and for processing at Caribbean refineries. After cash-strapped PDVSA did not make payments on time, BP in May halted further discharges of cargoes of U.S. crude at the port of Curacao. Then a swap agreement was reached involving deliveries of Venezuelan oil to BP as payment for the U.S. crude.

Exxon's Guyana Oil Discovery May Be Twice as Large as Thought | Rigzone - Exxon Mobil Corp.’s oil discovery off the coast of Guyana may hold as much as 1.4 billion barrels, twice the size of the previous estimate, making it worth as much as $69.5 billion based on current prices. The Liza field 120 miles (193 kilometers) from the coast of Guyana is a “world-class discovery” that probably will yield the equivalent of 800 million to 1.4 billion barrels of crude. Hess Corp., a partner in the field, will see a a 39 percent boost in current proved reserves at the upper end of the estimate. The Liza discovery may not add to global oil supplies for years as deepwater finds can take half a decade or more to bring into production. It’s an enormous discovery for Hess. At the high end of the estimate, the New York-based company’s stake equates to 420 million barrels, a 39 percent addition to proved reserves.

Australia's Santos links with Bangladesh's Bapex to drill offshore - Australian oil and gas exploration company Santos inked an agreement Monday with state-run Bangladesh hydrocarbon exploration company Bapex to carry out offshore drilling at the Magnama structure in the Bay of Bengal. Bapex would now have the opportunity to carry out oil and gas exploration offshore for the first time under the JV with Santos, Bapex managing director Md Atiquzzaman told Platts Monday, boosting the Bangladesh's company technical know-how in offshore exploration. Under the deal, Bapex will pay Santos US$16.50 million for entering the JV under a "binding offer agreement," Atiquzzaman said. Santos will have 51% of the JV, with Bapex holding a 49% stake, he said.Before the deal, Santos owned 100% of the Magnama structure after it bought Cairn Energy's interests in Bangladesh in 2010. "We are hopeful of having a potential hydrocarbon reserve in Magnama," said Santos' Dr. Mahmudul Karim at the deal signing ceremony, adding that Santos hoped to start drilling the Magnama-2 well in February next year. The drilling cost has been estimated at $26 million, with Bapex bearing $12.7 million of the expenses. Bangladesh's entire natural gas production currently comes from onshore gas fields after the shutdown of the Santos-operated offshore Sangu gas field in October 2013.

Did Brexit Kill The Oil Price Rally? - Oil prices fell again on Monday after last week’s rout following the Brexit vote, deepening the losses and killing off a multi-month oil price rally. There is quite a bit of debate around how lasting the negative effects of the Brexit result will be for crude oil. On the one hand, there has been no change to the physical oil market. The global economy continues to hum along, albeit at an unimpressive pace. Billions of people continue to fuel up their cars, factories continue to operate. In other words, not much has changed. Although the UK ranks as a top five global economy, a Brexit won’t materially affect the supply/demand balance for crude oil, even if a withdrawal from Europe turns out to be hugely negative for economic growth. Goldman Sachs looks at the numbers: "If we assume a 2 percent drop in UK GDP in response to the exit vote, which is on the high end of our economists' estimates, then UK oil demand would likely be reduced by 1 percent or 16,000 barrels per day, which is a 0.016 percent hit to global demand. This is extremely small on any measure,” the investment bank wrote following the vote. In that sense, the crash in oil prices seems unjustified. But the Brexit is much more significant for the financial and currency markets than it is for oil supply and demand. And these effects can be just as important for price movements of WTI and Brent.

The Oil Price Rebound Will Be Brief – Goldman Sachs -- Goldman Sachs has rejected analysts’ opinions that the global oil market is recovering, noting that while it expects a “modest” deficit in the coming months based on the slight rebound in oil prices, the market will again be in a state of surplus by early next year. It may seem as if oil is recovering on the back of supply disruptions that have helped to chip away at the global glut and push prices close to $50, but Goldman says that in the best-case scenario this isn’t a rebound—it’s just the first signs of one. Goldman Sachs’ analysts point to the restart of Canadian oil sands production following the devastating wildfires, and OPEC’s stay-the-course production as two indications that the a surplus is in store for early next year. They also note that non-OPEC production could be less than what was previously anticipated due to the slight price recovery that has producers pumping again. Goldman Sachs’ predictions echo those released Tuesday by the International Energy Agency (IEA). The Agency had earlier predicted that the 2016 oil stockpile would reach 1.5 million barrels per day. Now, it expects that figure to be 800,000 bpd—a 40-percent lower surplus than estimated just a month ago.

Goldman Warns Of Downside Risk To $50 Oil Forecast Due To Ceasefire With Niger Delta Avengers -- In the aftermath of the successful Brexit referendum, many expected France, Italy, maybe Catalonia, and the Netherlands to demand a referendum next. Instead, the loudest call for a referendum over the weekend came from an odd source: the Niger Delta Avengers, who as we profiled recently, "hold the price of oil in their hands" by mothballing Nigerian production and exports for the past two months. President Buhari borrow a leaf from PM David Cameron, call for a referendum and let Nigerians decides like they did to vote you into Power. — Niger Delta Avengers (@NDAvengers) June 25, 2016 As All Africa adds,the group which has been attacking Nigeria's oil infrastructure since early this year urged President Muhammadu Buhari to call the vote, in a post on Twitter at the weekend. "It's probably not going to happen," says Ryan Cummings, a political analyst at Signal Risk. "The Niger Delta Avengers is not the first group to agitate for a seperate state in Nigeria. It's a common place used by other groups in the country, most notably Boko Haram itself." The attacks have so far cut oil production by some 600,000 barrels a day. This, and the global oil prices remaining low, has sent Nigeria's economy into a tailspin. "[The government] should be concerned that they have a group that seems quite capable to strike targets in defiance of Nigeria's naval capabilities," says Chris Ngwodo, a security specialist of the region. "In my view, they should not be answering to the requests of this group, because doing so would be a signal that violence is a tool of political engagement and that would be disterous for the nation". Abuja has offered to talk with the Avengers but the militant group has denied reports it has met government representatives. The group also this weekend called for Buhari to visit the Niger delta region. That may not be the case. According to a new note just out of Goldman, a recent tentative ceasefire between the Nigerian government and the NDA has created upside risk to local production and ownside risk to Goldman's $50/bbl H2 price target.

The One Chart That Shows Why Oil Prices Have To Keep Rising - There has been a lot of pessimism among oil investors in recent months, and indeed the bear market over the last couple of years in black gold has destroyed many nest eggs. With that said, oil investors who have run for the hills could find themselves regretting that decision in the months and years to come. Oil prices are almost certain to continue rising and the chart below spells out why. The recent bear market in oil is largely a by-product of a technology shock and a set of ideal production conditions that will be hard for the world to replicate in the medium-term. As the chart shows, the next century really will be the Asian Century – at least when it comes to oil demand. Western Hemisphere demand has been flat since roughly the year 2000, and even before that, growth was fairly uneven. Unlike the oil shock of the 1980’s, which caused an unsustainable rise in Western demand for oil to plummet, there has been no comparable extreme run up in oil prices today, nor has there been a resulting collapse in demand. On the Asian side, demand growth has been steady and consistent for decades, tracking the rising development of the Asian tigers and the slow lumbering rise of China. While China is still not a first world nation, it’s not as poor as it was. At this stage, China is really a second world nation – between the first and third world; an appropriate moniker given it is the last major bastion of communism (which is what the term first/second world referred to). There is still significant opportunity in Asian nations for additional development. India is extremely undeveloped, while smaller though still significant nations like Malaysia and Indonesia still have opportunities as well. All of this is merely to point out that despite the advancing technology in the West, the Asian nations are still extremely underdeveloped and have huge needs, creating massive upside potential for oil demand.

WTI Jumps Above $48 After Bigger Than Expected Crude Inventory Draw - Last week's huge API-reported inventory draw followed by disappointing DOE-reported draw sent crude prices flip-flopping around $50 before they plunged into Brexit. Having ramped all day and beyond the NYMEX close, WTI tagged $48 and was fading into the API data. Against expectations of a 2.5mm draw, API reported a 3.86mm draw (remember they said 5.22mm draw last week before DOE said 917k). The entire complex saw inventories drawdown with Cushing more than expected, bouncing WTI back above $48. API

US gasoline consumption (implied) averaged 9.7 million b/d over last 4 wks, seasonal record, and up +173,000 on 2015 -- sets new record
US distillate consumption averaged 3.8 million b/d over last 4 weeks, very close to 2015 and 10yr avg levels US distillate stocks adjusted for consumption continue to fall rather than rise as oversupply worked down
US distillate stocks fell -1.8 million bbl to 151 million bbl last week, just +14.7 million bbl (+10.8%) above 2015
US refinery throughput rose +190,000 b/d to a new seasonal record of 16.695 million b/d (up +164,000 b/d on 2015). It would be interesting to know how much of this is related to a) the French refinery strikes; and, b) the Venezuela debacle.
US gasoline stocks adjusted for consumption edged up to 24.6 days, versus 22.7 days in 2015 and 10yr avg 22.9 days.
US gasoline stocks rose +1.4 million bbl to 239 million bbl, and now +22 million bbl (+10%) over 2015 level -- by the way, a new graph is needed -- the current numbers are practically off the historical graph.
US crude oil imports returned to more normal 7.6 million b/d last week from the elevated 8.4 million b/d in prior week.
US commercial crude oil stocks fell -4.1 million bbl to 527 million bbl last week, but a new graphis still needed. Current data is almost off the historical graph
US commercial crude stocks fell more heavily than usual with YoY surplus down from +68 million to +61 million bbl

Two-day crude rally halted as focus returns to fundamentals - - The oil complex settled lower Thursday as a two-day rally lost momentum and the market shifted its focused back to supply and demand fundamentals, while a stronger dollar provided downward pressure. NYMEX August crude settled $1.55 lower at $48.33/b, while ICE August Brent settled down 93 cents at $49.68/b. Prompt NYMEX crude had gained $3.55 in the previous two trading sessions, while ICE Brent was up $3.45 over the same period. Refined products tracked crude lower, with NYMEX July RBOB settling down 2.34 cents at $1.5014/gal and NYMEX July RBOB 4.88 cents lower, flipping below RBOB after settling at a premium yesterday for the first time since February 29. "The dollar is up pretty strongly today and that is probably behind some of the downward pressure." The dollar index was trading 0.471 point higher at 96.240 at 2:30 pm EDT (1830 GMT). Some market spectators cited the downside risk to prices from rising Nigerian output on the heels of a ceasefire agreement with the Niger Delta Avengers, a rebel group that unleashed a series of attacks on oil infrastructure that cut production by at least 400,000 b/d. "After a furious two-day rally that eliminated most of the post-Brexit losses in equity and energy markets, petroleum prices are sliding once again this morning," TAC Energy said in a note. "A potential cease-fire agreement in Nigeria -- where crude oil production has been crippled by attacks on oil infrastructure -- is being credited with the selling so far, but it's worth noting that US and European equities are also taking a break from their recovery rally."

Is Raymond James’ $80 Oil Realistic? | OilPrice.com: Crude oil prices have stabilised near the $50 per barrel mark, leaving traders confused as to whether the next 20 percent move from the current levels is going to be higher or lower. The divergent views of the experts don’t make the job easier, and instead, add to the confusion. A Raymond James report forecasts an $80 per barrel oil price in 2017—a figure which is 60 percent higher than current levels. On the other hand, A. Gary Shilling, president of A. Gary Shilling & Co., a New Jersey consultancy, and author of “The Age of Deleveraging: Investment Strategies for a Decade of Slow Growth and Deflation,” forecasts that oil will drop to $10 per barrel from the current levels, reports Bloomberg. Further complicating matters, there is a Goldman Sachs report that says that the oil market will be back in a surplus by early 2017, reports Oilprice. So which outcome currently looks most likely to become a reality in the future? Though supply disruptions are not a new phenomenon, large-scale supply outages to the tune of 3.5 million barrels per day is significant, because it turns the supply glut into a deficit. Though it is easy to confirm that the Canadian supply will be completely restored, forecasting normalization of disruptions in Nigeria and Libya is more difficult. However, efforts are in progress in both places to bring supply back on track. The result of these efforts was seen in Nigeria in June, where production increased from 1.3 million barrels per day in the early part of the month to 1.9 million barrels per day by the end of the month, as per Nigerian government sources. Nigeria is targeting production of 2.2 million barrels per day in July 2016, if pipeline repairs are completed, reports the Market Realist. If Nigeria is able to do so, it will be a significant boost to the supply. As these disruptions are temporary in nature, any success with normalization will again lead to a supply excess.

Shilling's $10 Oil Prediction Is Not Completely Ridiculous | OilPrice.com: Few expected oil prices to crash below $30 per barrel earlier this year, but that is just what they did. Now that oil is back up near $50 per barrel, the worst is over…right? Not everyone thinks so. Over at Bloomberg View, A. Gary Shilling is making a headline-grabbing prediction: that oil will not only fall from today’s levels, but will fall to between $10 and $20 per barrel. Many in the energy world would roll their eyes at such a prediction, and it could be way off base. But a year ago when oil prices rose to $60 per barrel at the beginning of the summer of 2015, everyone also thought the worst was over. Companies began adding rigs back to oil fields, hoping to capitalize on a rebound in prices. But crude began crashing again at the end of the summer, culminating in a deep plunge below $30 per barrel in January and February of this year. Very few people saw that coming. Now, most analysts and oil companies, although more cautious than a year ago, again think that the worst is over. A. Gary Shilling disagrees. He says that the run up in prices over the past few months was due to temporary supply outages in Canada and Nigeria, not based on lasting fundamentals. And the fundamentals are weak. Iran is back, and aims to double production to 6 million barrels per day by 2020. Libya could bring production back. And Saudi Arabia and Russia continue to produce at elevated levels. Meanwhile, shale producers have become more efficient and successfully lowered breakeven costs. Indebted companies will continue to produce in an effort to pay back creditors. On the demand side, China’s economy is slowing. The West is becoming more energy efficient, needing less oil and gas for their economies.

OilPrice Intelligence Report: Market Uncertainty Holds Back Oil Price Rally -- Oil prices bounced around this week, stabilizing after the Brexit chaos, but failing to rally as the oil markets returned to concerns about oversupply. Nigeria has brought back somewhere around 500,000 barrels per day to the market, restoring disrupted supply. Canada continues to rebound from the wildfires a few weeks ago as well. But there is no consensus about where crude oil prices will go from here. The restoration of supplies from Canada and Nigeria have caused the market contango to widen, indicating concerns about short-term oversupply. Moreover, OPEC production hit a record high in June, on gains from Iran and Saudi Arabia. Still, because the markets have moved closer to a balance, chipping away at the global surplus, there are some analysts who argue that things are not so grim. EIA reported another strong reduction in oil storage levels, falling by 4 million barrels last week, while production also continues to slide. In short, the markets and energy analysts are at odds over whether prices will rise or fall in the short run. The uncertain effects of the British exit from the European Union is also adding to the confusion. “We see more uncertainty than we have seen before in terms of price formation,” Eldar Saetre, chief executive of Statoil ASA, told The Wall Street Journal in an interview. WTI and Brent stayed just below $50 per barrel in early trading on Friday. The EIA released new monthly figures for April, showing that U.S. oil production fell by 222,000 barrels per day compared to a month earlier, tipping U.S. output below 9 million barrels per day for the first time since September 2014. The retrospective monthly figures tend to be more accurate than the more recent weekly data. Still, the EIA says that for the week ending on June 24, it estimates oil production fell by another 55,000 barrels per day to 8.62 million barrels per day.

US energy secretary sees oil market coming into balance (AP) — The U.S. energy secretary said Friday he sees the global oil market coming into balance over the next year as rising demand catches up with a two-year-old supply glut that depressed prices. Ernest Moniz said supplies should be adequate after the market comes into balance. He said Saudi Arabia has made clear it will maintain spare production capacity if it is needed by the market. Moniz spoke after meeting with his Saudi counterpart, Khalid al-Falih, while both were in Beijing for a gathering of energy ministers from the Group of 20 major developed and emerging economies. The Saudi minister told the Houston Chronicle on June 22 the oversupply of oil was ending and he expected markets to come into balance this year. “That’s reasonable, although it could also go into next year,” said Moniz. “Let’s say, within the next year, most of the people would expect a balance in the market.” Crude prices tumbled from 2014 highs of more than $100 a barrel to a 13-year low of less than $30 in mid-February before rising to just under $50. “We still are in a situation of more production than demand,” said Moniz. “The gap is narrowing as global demand goes up slowly and production is not going up.” Moniz said higher prices could lead to more supply as operators develop additional U.S. wells. "As prices go up — $50, $60, $70 — you probably will see more of those wells being completed,” he said. “The market seems to be pretty well supplied, and there is no reason to think there will be a big change over the next couple of years.”

US rig count up 10 this week to 431 (AP) — The number of rigs exploring for oil and natural gas in the U.S. increased by 10 this week to 421. A year ago, 862 rigs were active. Oil and gas exploration has plummeted amid depressed energy prices. Houston oilfield services company Baker Hughes Inc. said Friday 341 rigs sought oil and 89 explored this week for natural gas. One was listed as miscellaneous. Among major oil- and gas-producing states, Texas and Oklahoma each gained four rigs, Colorado was up two and Louisiana one. Alaska and New Mexico declined by two apiece. Arkansas, California, Kansas, North Dakota, Ohio, Pennsylvania, Utah, West Virginia and Wyoming were unchanged. The U.S. rig count peaked at 4,530 in 1981. It bottomed out in May at 404.

Oil rig count rises by the most in 6 months - The US oil rig count rose by 11 to 341 this week, the biggest increase since December 2015, according to driller Baker Hughes. The tally has now risen for four out of the last five weeks, as rising oil prices encouraged some producers to ramp up production. Last week, the count fell by 7 after climbing during the prior three weeks — the longest streak since last August. The gas rig count fell this week by 1 to 89, while miscellaneous rigs were unchanged at 1, taking the total up by 10 to 431. West Texas Intermediate crude futures in New York were little changed after the data, down 0.2% to $48.30 per barrel.

BHI: Land, oil rigs lift overall US rig count by 10 units - Lifted entirely by onshore oil-directed units, the US drilling rig count jumped by 10 during the week ended July 1 for the second time in 3 weeks, tallying 431 rigs working, according to data from Baker Hughes Inc. The count has now risen in 4 of the past 5 weeks, gaining 27 units over that time (OGJ Online, June 24, 2016). Since the overall drilling dive commenced following the week ended Dec. 5, 2014, the count has fallen 1,489 units. Amid the recent increase in drilling activity, the US Energy Information Administration this week noted that some 380,000 stripper oil wells were operating in the US at yearend 2015 compared with just 90,000 nonstripper oil wells. Stripper wells, which produce no more than 15 boe/d over a 12-month period, accounted for 10% of overall US crude oil production in 2015. Their share of output, however, was down nearly half from their 2008 level because of “the large increase of production volume from very prolific wells drilled in shale and tight oil formations with enhanced completion techniques,” EIA explained.Lifted entirely by onshore oil-directed units, the US drilling rig count jumped by 10 during the week ended July 1 for the second time in 3 weeks, tallying 431 rigs working, according to data from Baker Hughes Inc. The count has now risen in 4 of the past 5 weeks, gaining 27 units over that time (OGJ Online, June 24, 2016). Since the overall drilling dive commenced following the week ended Dec. 5, 2014, the count has fallen 1,489 units.Amid the recent increase in drilling activity, the US Energy Information Administration this week noted that some 380,000 stripper oil wells were operating in the US at yearend 2015 compared with just 90,000 nonstripper oil wells. Stripper wells, which produce no more than 15 boe/d over a 12-month period, accounted for 10% of overall US crude oil production in 2015. Their share of output, however, was down nearly half from their 2008 level because of “the large increase of production volume from very prolific wells drilled in shale and tight oil formations with enhanced completion techniques,” EIA explained.

OPEC Oil Output Hits Record High in June on Nigerian Rebound (Reuters) - OPEC's oil output has risen in June to its highest in recent history, a Reuters survey found on Thursday, as Nigeria's oil industry partially recovers from militant attacks and Iran and Gulf members boost supplies. Higher supply from major Middle East producers except Iraq underlines their focus on market share. Talks in April between producers on freezing output failed and have not been revived as a recovery in prices to $50 a barrel reduces the urgency to prop up the market. Supply from the Organization of the Petroleum Exporting Countries has risen to 32.82 million barrels per day (bpd) this month, from a revised 32.57 million bpd in May, the survey based on shipping data and information from industry sources found. That June output figure would be less than the average demand OPEC expects for its crude in the third quarter, suggesting demand could exceed supply in coming months if OPEC does not pump more than current levels. "We could see a slight supply deficit - it depends on further development of unplanned outages," said Carsten Fritsch, analyst at Commerzbank in Frankfurt. OPEC's June output exceeds January's 32.65 million bpd, when Indonesia's return as an OPEC member boosted production and output from the other 12 members was the highest in Reuters survey records, starting in 1997. Supply has surged since OPEC abandoned in 2014 its historic role of cutting supply to prop up prices. The biggest increase in June of 150,000 bpd came from Nigeria, where output had fallen to its lowest in more than 20 years due to militant attacks on oil facilities, due to repairs and a lack of major new attacks since mid-June. Iran managed a further supply increase after the lifting of Western sanctions in January, sources in the survey said, although the pace of growth is slowing. Gulf producers Saudi Arabia and the United Arab Emirates increased supply by 50,000 bpd each, the survey found. Saudi output edged up to 10.30 million bpd due to higher crude use in power plants to meet air-conditioning needs.

OPEC’s Pain Is Only Getting Worse As Revenues Continue To Fall - Yahoo Finance: OPEC lost $349 billion in revenue last year because of low oil prices, cutting revenues almost in half from the year before. A report from the EIA in mid-June estimated 2015 revenues for OPEC countries at $404 billion, down 46 percent from the $753 billion the member countries earned in 2014. Revenues last year fell to their lowest level in eleven years. Worse still for OPEC is the fact that revenues could fall even further this year, as low oil prices sank to new depths, particularly in the first quarter of 2016. The EIA projects OPEC revenues this year to drop to $341 billion. That will result in per capita oil export revenues in OPEC countries falling from $606 in 2015 to $503 this year.For its part, OPEC put out a more dire assessment of its own finances, putting its losses last year at $438 billion, much higher than the $349 billion estimated by the EIA. That came even though overall exports climbed by an average of 400,000 barrels per day, or a 1.7 percent increase, largely because of production gains in Iraq and Saudi Arabia. The plunging revenue led to OPEC members to post a current account deficit of $99.6 billion, the first deficit since 1998. That compared to the 2014 surplus of $238.1 billion. The largest losses came from Saudi Arabia, which saw revenues plunge nearly in half from $247 billion to just $130 billion last year. Of course, those losses merely reflect Saudi Arabia’s importance as the group’s largest oil producer and one of the largest producers in the world. The revenues that Riyadh earns from exporting oil accounts for one-third of total OPEC earnings.

Saudi Arabia’s Oil Storage Falling As Exports Exceed Production - The U.S. has seen several weeks in which the levels of crude oil sitting in storage have declined, falling from 80-year record highs. Inventories have dropped more than 10 million barrels since May, offering clues that suggest that the oil market is moving closer to a supply/demand balance. Although the EIA storage figures are closely watched by oil analysts, a lesser known but similar metric from Saudi Arabia also indicates an oil market continuing to adjust. According to data from the Joint Organisations Data Initiative, and reported on by Bloomberg, Saudi oil inventories have declined for six consecutive months, the longest period of contraction since data collection began 15 years ago. Saudi oil inventories have drawn down by 38.6 million barrels since October, taking storage down to 290.9 million barrels, a two-year low. The new Saudi energy minister Khalid Al-Falih told Bloomberg TV on June 2 that he sees “a balanced market.” He also said that Saudi Arabia has “started inventory drawdowns that will continue for the foreseeable future.”The declines are contributing to a convergence in supply and demand. As exports continue to exceed production, Saudi Arabia should continue to burn through inventories. But it cannot keep up that pace indefinitely. At some point, if it cannot boost production (or chooses not to), oil exports will have to fall as inventories become low. A drop in exports will tighten global supplies, reducing any remaining global surplus and thereby push up oil prices. Moreover, the drawdowns could increase because of higher domestic oil demand during summer months, as air conditioners run full blast. Saudi Arabia consumes a substantial volume of oil for power generation, upwards of 1 million barrels per day. But for now, few have noticed the large declines in oil storage levels. “The drop in Saudi crude stocks signals the rebalancing has started,” Amrita Sen, chief oil analyst at Energy Aspects Ltd., told Bloomberg. “Crude stocks are coming off in places where either the data is opaque or the market isn’t paying as much attention.”

Aramco, SABIC plan joint study for crude-to-chemicals complex - Oil & Gas Journal: Saudi Aramco and Saudi Arabian Basic Industries Corp. (SABIC) plan to conduct a joint feasibility study for development of a fully integrated crude oil-to-chemicals complex in Saudi Arabia. The proposed plant would use a crude oil-to-chemicals process derived from improved refining technology that mixes innovative configurations with proven conversion technologies to create an integrated petrochemical complex capable of maximizing chemical yield, transforming and recycling byproducts, driving efficiencies of scale and resource optimization, and diversifying Saudi Arabia’s petrochemical feedstock mix, the companies said. Pending a positive outcome of the study, Aramco and SABIC plan to establish a joint venture to advance the project, which if approved, would fulfill Saudi Vision 2030 goals for the downstream sector (OGJ Online, June 1, 2016). The companies did not disclose further details regarding the proposed project. Announcement of the joint study follows a May 21 joint release from Aramco and SABIC quashing speculative news reports that the companies were planning to merge their petrochemicals businesses. While the companies clarified they had no intention to pursue a merger, they did confirm they would continue to explore partnership opportunities that would help to expand and diversify Saudi Arabia’s economy.

Iran’s Oil Production Is Slowing Fast | OilPrice.com: A major part of the fall in oil prices last year was driven by concerns over the rising production levels of Iran. With nuclear sanctions in place, Iran had been forced to significantly curtail production due to lack of buyers. Once those sanctions disappeared due to the Iranian nuclear deal, the country was prepared to begin exporting crude en masse once more. That outcome caused investors to panic and led oil prices to fall considerably. Analysts reassured the markets that it would take a couple of years for Iran to get production back to pre-sanctions levels. Almost all of this conventional wisdom has turned out to be incredibly wrong. Iranian oil production has rebounded much faster than many analysts ever anticipated as the chart below shows. At this point, Iran is roughly back to pre-sanctions production levels. Score one against analysts who expected the process to take years. The result is that there is probably very little additional crude that is going to come online from Iran. The country is already pumping as fast as it can, and frankly its post-sanctions export program has been at best minimally successful. Again, this is a ding on conventional wisdom that suggests Iran’s production would have a significant impact on the market share of other major oil producers. This is probably a large part of what has driven Saudi commentary that the oil glut has disappeared. Iran believes it can move from producing 3.5 million barrels per day (mb/d) in May to 4.8 mb/d by 2021, but to do that the country needs $70 billion in foreign capital to hit the target. The reality is that capital is probably not going to come in the volume that Iran needs. China has its own problems to deal with, and Europe is still very wary of reengaging with Iran. The EIA thinks that the best case production scenario for Iran is 4.1 mb/d and that’s with the EIA assuming that Iran gets foreign capital and technology, and that sanctions do not remerge on Iran – a political possibility that cannot be ruled out.

Iran exports 28 mil mt of petrochemicals worth $3.5 bil Mar 20-June 20 - Iranian petrochemical plants exported 27.87 million mt of petrochemical products worth $3.54 billion in the period March 20-June 20, the Ministry of Petroleum's official Shana news agency reported Wednesday. The exports accounted for 33.8% of Iran's total exports, Shana said. Shana did not provide a breakdown of its petrochemicals exports. Iran is known to be a major exporter of polyethylene and methanol. Iran exported liquefied natural gas worth $1.7 billion and liquefied propane worth $343 million during the period, Shana reported.

Indonesia's Pertamina targets stakes in two Iranian oil, gas blocks - - Indonesia's state-owned Pertamina will sign a memorandum of understanding with the National Iranian Oil Co. next month to develop oil and gas blocks in Iran. Under the initial agreement, Pertamina will be allowed access to data on four Iranian oil blocks, a senior company official said Friday. "There are two to four blocks that will be evaluated based on the initial study. Of the four, there are two blocks that will be our priority," Syamsu Alam, Pertamina's upstream director, said. Pertamina expects to get an additional production of 30,000 b/d from each block if it is allowed to acquire the blocks, Alam said.Indonesia and Iran have recently intensified efforts to cooperate. Pertamina and NIOC recently signed a heads of agreement for the latter to supply refrigerated LPG to the former. Pertamina is also planning to import a 1-million-barrel cargo of Iran Light crude oil in the third quarter of this year to test the grade at its 348,000 b/d Cilacap refinery in Central Java Pertamina has allocated a capital expenditure of $5.31 billion this year, of which 72% is for upstream business. The company plans to spend $2 billion on upstream mergers and acquisitions this year. The state-owned company's overseas blocks produced 83,000 b/d in May 2016 compared with 75,000 b/d in May last year. The increase mainly came from the company's 10% stake in the West Qurna block in Iraq. Pertamina has three producing oil and gas blocks located in Malaysia, Algeria and Iraq.

Islamic State, Political Instability Derails Libyan Oil Industry | Rigzone - Ongoing militant attacks on hydrocarbon installations in Libya have helped stem the production of oil in the country to well below pre-2011 output levels. “Such activity, in combination with oil embargos, has contributed to an 80 percent fall in national oil output since 2011,” said Ruth Lux, a senior consultant within JLT’s credit, political & security risk division consulting team. For most of the last two years, oil production in Libya has been stuck at around 300,000 to 400,000 barrels per day (bpd), Martijn Murphy, research manager for Wood Mackenzie’s Middle East and North Africa upstream oil and gas team, told Rigzone.This output drop is not good news for the country considering it’s one of the most dependent oil economies in the world, according to a study by Bloomberg released in January.Since the start of 2016, Islamic State (IS) has launched a number of attacks on Libya’s oil and gas assets.In January, IS set fire to oil storage tanks in anassault on the Ras Lanuf terminal in northern Libya and the group is suspected to have staged an attack on a water plant near the Sarir oil field in eastern Libya in March. An attempted assault on an oil field on Apr. 2 led to the death of two guards and it was revealed on Apr. 10 that staff from three oilfields in eastern Libya had been evacuated because of fears of further attacks.Following the latest assaults, the most senior United Nations official in Libya, Martin Kobler, said he was deeply concerned. “The attacks of the so called Islamic State…are a serious threat to Libya’s oil installations,” said Kobler, the special representative of the secretary-general and head of the UN support mission in Libya, in an April 27 press release.

Russia's attack on U.S.-backed rebels in Syria puzzles, frustrates the Pentagon: One week after Russian aircraft bombed American-backed rebels in Syria, U.S. officials say they are still waiting for Russia to explain the incident that has put the two militaries at risk of confrontation. Russian aircraft on June 16 dropped cluster bombs on a New Syrian Army unit garrisoned at a base in al-Tanf, a remote desert outpost where the borders of Iraq, Syria and Jordan meet. The New Syrian Army unit is a product of the American-backed train-and-equip program. Its mission is to fight Islamic State militants in Syria and to avoid confrontation with forces loyal to Syrian President Bashar Al Assad. The Russians provided no explanation for the strike, which violated the “memorandum of understanding” between the U.S. and Russia that was put in place last year, and designed to maintain flight safety and avoid misunderstandings as the two major militaries share the same airspace and support different factions of the multi-sided civil war.

Islamic State suspected after suicide bombers kill 42 at Istanbul airport | Reuters: Turkey pointed the finger at Islamic State on Wednesday for a triple suicide bombing and gun attack that killed 42 people at Istanbul's main airport, and President Tayyip Erdogan called it a turning point in the global fight against terrorism. In the deadliest of a series of suicide bombings this year in Turkey, the attackers struck the busy airport, a symbol of Istanbul's role as the Muslim world's most open and cosmopolitan city, a crossroads between Europe and Asia. Three bombers opened fire to create panic outside the airport on Tuesday night, before two of them got inside and blew themselves up. Two hundred and thirty-nine people were wounded, officials said, giving a full account of the bloodshed. Prime Minister Binali Yildirim said the attackers shot at random to overcome security checks at the international terminal of Ataturk airport. One blew himself up in the departures hall, a second in arrivals, and the third outside. Authorities said on Wednesday 41 were killed. The figure is now believed to be 42 after Turkish state-run news agency Anadolu reported an injured woman had died.

Shi'a death squads liberate Fallujah from Sunni death squads: — Shi’a death squads have resumed patrols on the streets of Fallujah, “restoring a sense of normalcy” to the beleaguered Iraqi city, residents say. The Shi’a patrols follow the flight of Sunni death squads, religious police, and bootleg pornography vendors who had dominated the largely Sunni city since the Islamic State conquered it in 2014. The rapid departure of ISIS has paved the way for a welcome return to sectarian tension, corruption and graft. Iraqi government forces announced new rules, heralding an end to the barbaric reign of ISIS. “We are delighted to announce an end to the Sunni-on-Sunni rape that has so typified Daesh rule,” said Brig. Gen. Haider al-Obeidi of the Iraqi Federal Police/Iranian Revolutionary Guard. “From now on, brutal violence against women and children will be conducted under the rule of law.” Fallujah’s embattled population expressed their gratitude at their liberation from slavery to second class citizenship. “We’re just so grateful!” exclaimed repatriated resident Amira Albu Issa. “I thought we’d surely be killed for being Christian, but now, we only have to worry about being killed for going outside on Friday nights.”

Oil Bulls Beware: Crude Demand Is About To Slide As China's SPR Is "Close To Capacity" - Throughout oil's torrid rally from the February lows, one major driver of demand - namely China - had been broadly ignored by the punditry which instead focused on supply, whether excess OPEC oversupply or lack thereof, due to production disruptions in Canada or Nigeria. And yet, China and specifically its demand, may have been the elephant in the room all along. Two months ago we reported that "China Is Hoarding Crude At The Fastest Pace On Record", a move which among other things was attributed to China's aggressively filling up its Strategic Petroleum Reserve. However, just a few weeks ago, we followed up with "China Oil Imports Drop To Four Month Low As Demand Is Expected To "Moderate Significantly" In 2016." We now may have an answer what has caused this drop. As Bloomberg says, citing a JPM report, "one of the pillars of oil’s recovery from the lowest price in 12 years may be on the verge of crumbling." The reason: as many speculated, a big source of China's demand in the past 5 months was Beijing's decision to stockpile oil for its SPR. However, that is now over as China is likely close to filling its strategic petroleum reserves after doubling purchases for it this year as prices plunged. JPM estimates that China's SPR demand was equivalent to approximately 1mm bpd. More importantly, stopping shipments for the reserve would wipe out about 15 percent of the country’s imports, according to the bank.

China's Robust Crude Oil Imports Mask Changing Fuel Dynamics (Reuters) - China is a bigger concern for crude oil and products markets than the current worries about the British vote to leave the European Union. On the surface crude imports by the world's No.2 consumer China look healthy enough, rising 16.5 percent to the equivalent of about 7.49 million barrels per day (bpd) in the first five months of the year compared to the same period last year. But there are several factors at work that make the strength in imports appear misleading. Firstly, domestic crude production is falling, with official figures showing output dropped by 7.3 percent in May from a year earlier, taking the decline for the first five months of the year to 3.7 percent. China produced 85 million tonnes of oil in the January-May period, equivalent to about 4.08 million bpd, representing a drop of about 170,000 bpd from the same period in 2015. This means that at least 170,000 bpd of the nearly 1 million bpd in additional crude imports in the first five months of this year has merely been to replace lost domestic output. The second factor at work is that China appears to be continuing to fill strategic storages at a fairly rapid pace. In the first five months of the year imports and domestic production were a combined 240.9 million tonnes, while refinery throughput was 221.3 million tonnes. This means that 19.6 million tonnes, or about 941,000 bpd went into either commercial or strategic storage. This is sharply up from the figures for 2015, which showed a difference between crude imports and domestic output and refinery throughput of about 560,000 bpd.

China May industrial profit growth slows to 3.7 percent year-on-year | Reuters: Profits of Chinese industrial companies rose 3.7 percent in May from a year earlier, slowing from April's pace and adding to concerns that the world's second-largest economy may be losing some momentum. A return to profit growth in the first quarter and a strong jump in March in particular had fueled hopes that China's economy was perking up, but data since then has suggested it may be stabilizing at best. "The continued slowdown in May profit growth further supports our view that growth momentum has remained weak or possibly weakened further," economists at Nomura said in a note. "We maintain our forecast for a slowing of real GDP growth to 6.3 percent year-on-year in Q2 from 6.7 percent in Q1." Profits in May rose to 537.2 billion yuan ($81.21 billion), the statistics bureau said on Monday. In the first five months of this year, profits rose 6.4 percent compared with the same period last year, the National Bureau of Statistics said on its website. But the performance was uneven across sectors, with profits in the mining sector falling 93.8 percent from a year earlier, the bureau said. Industrial profits in January-April rose 6.5 percent from a year earlier, with April up 4.2 percent.

China consumption of cheap goods falls - Sales of daily necessities fell in China last year, a worrying sign for an economy relying on increased consumption to take up the slack for a slowdown in investment and exports. Fast-moving consumer goods sales to urban consumers fell 0.9 per cent year on year in volume terms, down from 0.1 per cent growth in 2014, according to a study by Bain & Company and Kantar Worldpanel. In value terms, FMCG sales grew 3.5 per cent, down from 5.4 per cent in 2014. The report tracked trends in sales of packaged foods, beverages, personal care and homecare goods, which together account for 80 per cent of sales of fast-moving consumer goods. Products aimed at blue-collar workers were hardest hit, with sales of instant noodles down 12.5 per cent and beer sales slipping 3.6 per cent in value terms. Sales of “value beer” fell more sharply than high-end brews. The report blamed a fall in the working population, which has raised the share of low-income retirees in the overall population, for the sales decline. It also cited the shift in low-end manufacturing jobs to cheaper locations such as Bangladesh and Vietnam. But other product categories continue to grow strongly. Make-up sales rose 15.5 per cent and skin care 13.2 per cent. “Despite the general malaise, some categories are making significant headway, highlighting how the performance of FMCG and other consumer sectors in China are operating at two distinct speeds: slow and fast,” said the report. Chinese consumers are also shifting their purchases from physical retailers to online platforms such as JD.com and Alibaba Group’s Taobao, the report found. Hypermarkets posted their first China sales decline last year. Hypermarket sales of fast-moving consumer goods in urban areas fell 0.2 per cent in value terms, with customer traffic falling 4.6 per cent.

Rebalancing, Wealth Transfers, and the Growth of Chinese Debt -- Michael Pettis -- For the past ten years much of what I have written about debt in China was aimed mainly at trying to convince analysts and policymakers that the Chinese economy was structurally dependent on an unsustainable increase in debt in order to generate GDP growth rates above some level. Today it no longer seems necessary to explain that Chinese debt levels are far too high. On May 9 the People’s Daily published a major front-page interview with an “authoritative figure”, thought to be very close to Xi Jinping, warning that the Chinese economy was in much worse shape than many believed largely because debt had risen far too quickly. Here is the South China Morning Post: A People’s Daily article published yesterday showed that China’s leadership is trying to make a grand shift in the nation’s economic policies in a bid to say goodbye to debt ­fuelled growth. In a sign of distaste for the credit-pumped growth in the past couple of months, the Communist Party mouthpiece cited an unidentified “authoritative” figure as saying that boosting growth by increasing leverage was like “growing a tree in the air” and that a high leverage ratio could lead to a financial crisis. Probably the real indication that the argument over whether or not China has a debt problem has been resolved is a May 7 article in the Economist. For years I had been extremely frustrated by the magazine’s coverage of the Chinese economy as being far too credulous and altogether too willing to assume away problems that other countries in similar circumstances had been unable to resolve. Last month, however, in a much-commented departure, the Economist suddenly reversed positions, warning that debt levels had become so extreme that “it is a question of when, not if, real trouble will hit in China.” In an alarming, but not alarmist, piece, the magazine acknowledged how serious China’s balance sheet distortions had become:

China Devalues Yuan Most In 10 Months As Premier Li Warns Of Brexit "Butterfly Effect" On Financial Markets, Economy --In a somewhat shockingly honest admission of the frgaility of the global financial system, Chinese Premier Li warns that a disillusioned British butterfly has flapped its wings and the entire global financial system could collapse. Responding to the plunge in offshore Yuan since the Brexit vote (down 7 handles to 5-month lows over 6.65), PBOC devalued Yuan fix by 0.9% (6 handles) - the most since the August crash - to Dec 2010 lows. Finally, we note USD liquidity pressures building as EUR-USD basis swaps plunge. Offshore Yuan is 3 handles cheap to onshore Yuan and 9 handles cheap to Friday's fix... While Chinese stocks remain 'stable' (despite Goldman suggesting more pain is due - regional cost of equity to rise 50-75bps as risk appetite shrinks after Brexit, equal to 5%-10% index decline), the less managed rest of the world is struggling and China knows it... Premier Li Keqiang said an increase in instability in a particular country or region could trigger the "Butterfly Effect," which could, in turn, affect the global economic recovery and financial market stability, according to comments posted on Chinese central govt’s website. All economies highly dependent on each other and no country can manage alone, Li said during meeting with WEF executive chairman Klaus Schwab in Tianjin.

Brexit aftermath: The West’s decline and China’s rise -- Brexit has little direct effect on the Chinese economy though it does increase the risk of financial volatility. In the long run it is hard to see it as anything but a plus for China as the West continues to decline and China continues to rise. In the immediate aftermath of the Brexit vote, stock markets all over the world tanked. The interesting exception was China: The Shanghai market fell 1 percent on Friday and then more than recovered it on Monday. In the short run, Brexit is a modest negative as Europe’s gross domestic product (GDP) and trade are likely to grow less rapidly, and the EU is China’s largest trading partner. But the Chinese economy is simply not that export-oriented anymore. In the aftermath of the global financial crisis, the contribution of net exports to China’s GDP growth has averaged around zero. China initially made up for lost external demand with a massive stimulus program aimed at investment. This has now led to excessive capacity in real estate, manufacturing, and infrastructure. As a result, investment growth is slowing (see figure below). But China’s GDP growth has held up well because consumption is now the main source of demand. It consistently delivers more than 4 percentage points of GDP growth and its contribution has been on an upward trend.

Japan consumer prices fall again in May - --Japanese consumer prices continued to fall in May while household spending softened again, likely adding to pressure on the Bank of Japan to take further action to secure stable inflation in the world's third-largest economy. Consumer prices excluding fresh food fell by 0.4% on year in May, sliding for the third straight month as energy prices continued to fall on year. The drop matched a median forecast of economists surveyed by The Wall Street Journal and the Nikkei. Household spending also fell 1.1% on year in May, for the third month of decline. Households spent less on education, housing and travel. The figures suggest Prime Minister Shinzo Abe is still struggling in his bid to reenergize Japan's economy. Mr. Abe says inflation is key to getting the economy growing after years of on-and-off deflation caused economic activity and wages to stagnate. Economists say inflation would also help shrink Japan's massive public debt load, the largest among developed nations. But the central bank says it will not reach its 2% inflation target until the year that ends in March 2018, after pushing back the time frame several times. Even after the bank introduced negative interest rates in January to goose inflation, prices are falling again.

BOJ set for more stimulus as consumer prices sink - Yahoo Finance: The Bank of Japan may be set for another round of stimulus. Data released on Friday showed consumer prices in May fell at their sharpest pace since 2013, delivering another blow to the central bank's efforts to goose an economy that has struggled to muster inflation for nearly three decades. Japan 's core consumer prices fell 0.4 percent in May from a year earlier, government data showed on Friday. The core consumer price index, which includes oil products but excludes fresh food prices, matched economists' median estimate for a 0.4 percent annual decline. Business statement meanwhile stayed flat, although the survey was conducted before last week's referendum in the U.K. where voters decided to leave the European Union (EU) . The soggy economic data comes in the backdrop of a sustained rise in the Japanese yen (Exchange:JPY=), which has risen sharply against peers after skittish investors piled into assets perceived to be safe after the uncertainty following the U.K. referendum. The dollar/yen par was trading around 103 Friday morning in Asia, down from 111 at the end of May.

JGBs yield curve flattens on Brexit, long yields hit record lows | Reuters: Long-dated Japanese government bond yields fell to record lows while shorter yields were flat to slightly higher on Monday, as Britain's decision to leave the European Union led to expectations of more global economic stagnation. The 20-year JGB yield fell 3.0 basis points to 0.080 percent , having fallen 83.5 basis points since the BOJ adopted negative rates in late January. The 30-year yield also fell to a record low of 0.110 percent, having fallen more than 100 basis points after negative rates. On the other hand, short- to medium term paper were steady to weaker, with the 10-year yield flat at minus 0.200 percent . "This doesn't look like short-term risk-off trading. It's more about that growth will be sluggish longer-term," said Akito Fukunaga, chief fixed income strategist at Barclays. Such expectations of low global growth and evaporation of yields due to negative interest rates in Europe and Japan are pushing down bond yields globally. To the extent that globalisation has boosted the world's growth over decades, separatist moves such as Brexit could hamper growth in the long run, investors say. The 10-year U.S. Treasuries yield fell to as low as 1.480 percent on Monday, with markets pricing out any chance of a rate hike by the Federal Reserve in coming months

Japan Feedback Loop Seen Turning All Sovereign Yields Negative - Japanese government bonds are caught in a self-propagating spiral that could soon see yields on every maturity below zero. QuickTake Negative Interest Rates Bank of Japan debt buying and more recently Britain’s shock vote to exit the European Union have turned yields negative on tenors as long as 15 years, forcing domestic investors to crowd into the longest bonds or flee into other foreign debt including U.S. Treasuries. The resulting rush into dollars is fueling demand from the fastest-growing investor pool for JGBs -- foreigners entering cross-currency swap trades seeking returns higher than in their home markets. This feedback loop sent yields on Japan’s longest bond, the 40-year, to as low as 0.065 percent on Tuesday, potentially hampering the effectiveness of any effort by the central bank to increase stimulus. Local investors highlighted dollar funding costs and foreign debt buying in a regular meeting with Finance Ministry officials Monday, complaining that trading had become difficult. “Only God knows how far yields will fall,” “If all bond yields are zero, even if the BOJ expands stimulus, you can’t expect yields will go much lower.” Sub-Zero World About 85 percent of the JGB market now yields less than zero. That on the 10-year note dropped to as low as minus 0.24 percent Wednesday, while the yield on 20-year bond fell to 0.04 percent and the 30-year yield reached 0.05 percent the day before -- all records.

Japan Yields All Drop Below 0.1% First Time in Global Bond Surge - Japan’s benchmark bonds are now all yielding less than 0.1 percent for the first time, leading a global surge in sovereign debt, as the U.K.’s decision to leave the European Union threatened to slow growth and keep the Federal Reserve from raising interest rates. The rally in Japan pushed yields on the nation’s longest debt, the 40-year bond, to 0.065 percent. Australia’s and South Korea’s 10-year yields dropped to unprecedented levels. Treasury prices slipped after yields approached records last week. Bonds have surged since Britons voted last week to leave the EU, driving a rush for the relative safety of fixed-income securities. The probability the Fed will raise interest rates this year plunged to about 8 percent, futures contracts indicate, with a cut seen more likely. Japanese government bonds, or JGBs are getting an extra boost because the Bank of Japan is buying record amounts as part of its battle against deflation. ‘Seismic’ Impact “There was a seismic result” in financial markets following the U.K. vote, said Toshifumi Sugimoto, chief investment officer in Tokyo at Capital Asset Management, who has 30 years of experience in the bond market. “It could set off a global recession. There’s a strong need for JGBs. It’s a safe haven, and there’s a scarcity because the BOJ keeps buying.” The yield on Japan’s benchmark 10-year bond dropped to an unprecedented minus 0.23 percent as of 7:21 a.m. in London. Thirty-year yields slid to an all-time low of 0.05 percent. Other records around the world include:

Benchmark JGB yield hits record low as global economy worries linger | Reuters: The benchmark 10-year Japanese government bond yield fell to a record low on Friday as lingering concerns about the global economy following the Brexit vote continued to drive investor demand for safe-haven debt. The 10-year yield was down 1 basis point at minus 0.245 percent, a historic low. The five-year yield also declined to a record trough of minus 0.330 percent. JGB yields, along with those of government bonds in other countries, have repeatedly hit record lows this week after the shock of Britain's June 23 vote to leave the European Union.

Indian banks' bad loans may rise to 8.5 pct by March 2017 - RBI | Reuters: Gross bad loans at Indian banks may rise to 8.5 percent of total assets by March 2017 from 7.6 percent in March 2016 if the central bank orders them to conduct a second round of asset quality reviews, a Reserve Bank of India report said on Tuesday. Meanwhile, under a "severe stress" situation, total bad loans could rise to 9.3 percent in March 2017, the RBI said in its semi-annual Financial Stability Report. The RBI added that the assessments, though "stringent and conservative", were also hypothetical, saying "the severe adverse economic conditions referred to here should not be interpreted as forecast or expected outcomes." The RBI last year told banks to conduct an asset quality review (AQR) in a bid to get a better picture of the extent of potentially soured assets held in the sector. Outgoing RBI Governor Raghuram Rajan had made cleaning up banks a priority during his nearly three-year tenure given the sector is saddled with $120 billion of sour loans, which is constraining new lending and corporate investments. Still, the RBI has not ordered a second round of formal tests, although it has said it would continue reviewing asset quality at banks. "The stress in the banking sector, which mirrors the stress in the corporate sector, has to be dealt with in order to revive credit growth," Rajan wrote in the report

Philippines tough-guy leader defies Catholic Church on birth control - The Philippines' tough-guy president-elect is turning his bare-knuckles campaign tactics on a potent adversary: the Roman Catholic Church and its opposition to artificial birth control.Rodrigo Duterte, who takes office Thursday, is known for never mincing words or shying from a fight. He has threatened, presumably in jest, to chop off the penises of men who resist his proposals for wide-scale vasectomies, according to a report by the Associated Press on Monday. And he is on record as cursing the pope after a papal visit to the Philippines caused massive traffic jams in Manila.But despite his famously vulgar utterances, Duterte appears to be dead serious about his crusade to lower the birthrate in his impoverished and fast-growing country of 102 million, where the majority-Catholic population has increased by 10 million in six years. The Philippines' birthrate of 2.9 children per family is much lower than in many African countries, where some average more than six children per family, but it is much higher than in Europe and in other Asian countries, including Japan and South Korea, which average 1.4 and 1.2 average births per family, respectively."I will reinstall the program of family planning. Three is enough," Duterte said Monday in a speech in Davao City, where he has governed as mayor or vice mayor for 22 years and where he instituted an ambitious policy of birth control and sterilization.

JASVINDER SIDHU: He said very confidently, “In any industry we can get sponsorship and we just have to organise agreement.” And he even offered me money and he said for every case, I think $5,000 he was offering.
NICK MCKENZIE: In a series of conversations, the visa fixer asked Jasvinder Sidhu to find new visa applicants among his friends and family back in India. The fixer would then arrange for a corrupt employer to provide the paperwork for a fake job and visa sponsorship.
JASVINDER SIDHU: They were offering multiple sponsorships in commercial cookery, in mechanics, IT as well because he said his boss could arrange 457 in IT – information technology.
NICK MCKENZIE: The visa scam came as little surprise to Jasvinder Sidhu. He knows of many Indians who’ve paid large cash sums to corruptly obtained skilled or student visas in an effort to get permanent residency.
JASVINDER SIDHU: I’ve been hearing it eight, nine years and the last time I heard was last week when somebody paid $45,000 cash.
NICK MCKENZIE: Now Sidhu is determined to expose what he’s learned about Australia’s immigration underworld.

Brazil loan defaults jump in May, led by corporate borrowers | Reuters: Loan defaults in Brazil hit a fresh record in May, the latest sign that the harshest recession in eight decades and the impact of a sweeping corruption probe have especially hurt the ability of corporate borrowers to stay current on their debt. Loans in arrears for at least 90 days rose to the equivalent of 5.9 percent of non-earmarked, outstanding loans in May from 5.7 percent in April, the central bank said in a report. The number is the highest since the central bank began keeping records of the indicator about five years ago. Early default ratios, or loans in arrears between 15 days and 90 days, rose for consumers and companies alike, a sign banks are increasingly refinancing potentially problematic loans earlier than usual. The so-called default ratio has climbed 1.3 percentage point over the past year. Concerned about the growing risk for credit as loan renegotiation and refinancing deals climb with the recession, banks raised the cost of borrowing to an annual average 52.3 percent on average in April, the report showed. The data provides a glimpse into loan-book quality as local banks struggle with the effects of the recession and "Operation Car Wash," a probe into corruption at state firms. Firms in Car Wash, as well as their suppliers, are negotiating with creditors ways to obtaining some debt relief as their revenue falter.

"Welcome To Hell" - Angry Unpaid First Responders Warn "Whoever Comes To Rio Will Not Be Safe" -- In May, Brazilian soccer great Rivaldo told tourists to stay away from the Olympics in Rio because of the violence, saying "You'll be putting your life at risk here." After that dire warning, the Rio state government declared a state of "public calamity" because it had gone completely broke. The government warned of total total collapse in public security, health, and transport. As a result of the declared state of calamity, the federal government was supposed to transfer $860 million to the state but the AP reports that as of yesterday the money hadn't been received. Rio's acting governor Francisco Dornelles said that there is a concern that the Olympics will be a big failure if things don't get back on track quickly. "I'm optimistic about the games, but I have to show reality. We can have a great Olympics, but if some steps aren't taken, it can be a big failure" Dornelles said. "How are people going to feel protected in a city without security" Dornelles added. Which is an excellent question, because the Rio police force rallied against the non-payment of wages and even the lack of basic supplies on Monday. At the city's airport a group of protesters spread banners that read "Welcome to hell. Police and firefighters don't get paid, whoever comes to Rio De Janeiro will not be safe" - probably not the message the world wants to be seeing just over a month away from the Olympics.

Brazil eyes 2017 fiscal gap of 150 bln reais -source | Reuters: The Brazilian government could set a primary budget deficit goal of around 150 billion reais for 2017 as federal revenue remains subdued due to a two-year recession, a government source told Reuters on Thursday. The steep deficit raises questions about the austerity drive of interim President Michel Temer and his economic "dream team" led by former central bank chief Henrique Meirelles. "It will be hard to lower the deficit and 150 billion reais is the best number for now," said the official, who asked not to be named. The government's economic team is expected to unveil the deficit goal next week. Meirelles, who is now finance minister, said earlier on Thursday the government will aim for the 2017 deficit to be smaller than the 170.5 billion reais ($53.52 billion) expected for this year. However, he acknowledged the shortfall will be above 100 billion reais as there are doubts about the government's capacity to increase revenues with a recession in its second year. "Temer's austerity speech has not yet turned into reality and that will hurt the credibility of his government and Meirelles," said Alex Agostini, chief economist with Austin Rating in Sao Paulo. Agostini said a large deficit allows Temer to score political points by increasing spending on popular government programs and pork barrel.

Mexico’s Classroom Wars -- The violent repression of striking teachers in 2006, ordered by the state governor, launched a social movement — called the “Oaxaca Commune” by supporters — that grew to encompass much more than the local teachers’ union. The movement mobilized large swathes of Oaxacan society against the repressive governor. Aggressive federal intervention hobbled the movement, but failed to wipe it out. Today the dissident teachers’ movement is in the streets again, this time in opposition to the federal government’s “education reform” program. The teacher’s movement is also more widespread than in 2006. Militarized attacks on striking teachers have occurred in Mexico City and throughout the country’s southern states. In the last month, the state of Chiapas has seen pitched battles between teachers and police forces, and the Zapatistas have spoken out in favor of the striking teachers.The movement mobilized large swathes of Oaxacan society against the repressive governor. Aggressive federal intervention hobbled the movement, but failed to wipe it out. Today the dissident teachers’ movement is in the streets again, this time in opposition to the federal government’s “education reform” program. The teacher’s movement is also more widespread than in 2006. Militarized attacks on striking teachers have occurred in Mexico City and throughout the country’s southern states. In the last month, the state of Chiapas has seen pitched battles between teachers and police forces, and the Zapatistas have spoken out in favor of the striking teachers. Last week the Mexican attorney general’s office arrested two of the leaders of the Oaxacan section of the teachers’ union, Local 22, on corruption charges. Then on June 19, federal and state police attacked protesters in Nochixtlán, Oaxaca, a town on the highway between the state capital and Mexico City, resulting in the death of at least eight protesters.

Europeans Contest US Anti-Russian Hype - A significant crack has been unexpectedly opened in the wall of Europe’s disciplined obedience to the United States. Germany’s foreign minister, Frank-Walter Steinmeier shockingly accused the North Atlantic Treaty Organization of “war-mongering” against Russia. German Foreign Minister Frank-Walter Steinmeier.Since the Bush administration’s twisting of events in the 2008 Russia-Georgia war, which the E.U. blamed on Georgia, Western populations have been subjected to the steady message that Russia is a “threat” to the West and is guilty of “aggression.” This reached a peak with the false narrative of events in Ukraine, in which blatant evidence of the West’s complicity in a violent coups d’état was omitted from corporate media accounts, while Russia’s assistance to eastern Ukrainians resisting the coup has been framed as a Russian “invasion.” The disinformation campaign has reached the depths of popular culture, including the EuroVision song contest and sports doping scandals, to ensure widespread popular support for U.S. hostile intentions against Russia. The Russian “aggression” narrative, based largely on lies of omission, has prepared the way for the U.S. to install a missile-shield in Romania with offensive capabilities and to stage significant NATO war games with 31,000 troops on Russia’s borders. For the first time in 75 years, German troops retraced the steps of the Nazi invasion of the Soviet Union.

Russia thinks US is using Netflix to get into people's heads - You might joke that Netflix is taking over the world, but to Russian Culture Minister Vladimir Medinsky, it is no joke. In an interview withnews service The Rambler, translated by The Moscow Times, Medinsky suggested that the US government is funneling money to exert American power across the globe. "The White House fully understands that through Netflix, they can get into every home, every television and then — into every head, Medinsky said," according to The Moscow Times. “Do you think that these gigantic startups get going all by themselves? That if a student is sitting there with an idea that billions of dollars come raining down?” The idea of using “soft power,” and specifically American culture, to further the American political agenda is not a new one. But Medinsky seems to also fundamentally not believe that the Silicon Valley system of venture capital could exist. That said, if the goal of Netflix is to exert control over Russian minds, it might not be doing a particularly good job. Netflix launched in Russia in January, and research from UBS in April suggested that interest in the service might be lackluster.

Erdogan Apologizes To Putin Over Death Of Russian Pilot, Calls Russia "Friend", Restores Ties With Israel -- In two stunning geopolitical developments over the past 24 hours, Turkey - which is finding itself increasingly snubbed by not only Europe but also the US - has pivoted dramatically and shortly after restoring full deplomatic ties with another country that has recently seen the cold shoulder from the Obama administration, namely Israel, moments ago apologized to Russia for last year's downing of a Russian jet which allegedly crossed above its territory as part of the Russian campaign against ISIS. As RT reports, Vladimir Putin has received a letter in which Turkish President Recep Tayyip Erdogan apologized for the death of the Russian pilot who was killed when a Russian jet was downed over the Syrian-Turkish border last November, the Kremlin said. Erdogan expressed readiness to restore relations with Moscow, Kremlin spokesman Dmitry Peskov said on Monday.

Greece To "Name & Shame" Debtors Owing Over EUR300k To The State --Greece’s Finance Ministry is determined to collect what belongs to the state and as KeepTalkingGreece reports, since repayment settlements and other forms of arrangements have apparently failed in pushing debtors to put their hands in their pockets, the ministry will call in the internet cavalry:it will name & shame on the web the names of those debtors owing more than 300,000 euro to tax office or to social security and pension funds. The provision that it will make mandatory the disclosure of debtors’ names will be included in the bill for “smuggling of tobacco products” expected to be submitted to the Parliament soon. The provision will affect debtors owing to the tax office more than 300,000 euro and to social security funds amounts more than this. If the debtor owes to the tax office and the social security funds the total amount of debt will be published. In the wake of this provision, the General Secretariat of Public Revenues has reportedly already sent notification to big debtors calling them to settle their debts by end of the month. According to daily Efimerida Ton Syntakton, “information indicates that the same bill will provide the mandatory presence of a judge during the tax office audits in the homes of self-employed declaring their home as basis of their business” Currently, only the relevant prosecutors’ order is required.

With 5 Million Unemployed, Spain Still Can't Find Workers - With soaring youth unemployment, and close to 5 million people out of work overall, one would assume that the last problem Spain would encounter would be that it can't find workers to fill open jobs. However, as Bloomberg reports, Spain is facing labor shortages as employers struggle to find capable employees. "We were looking for people for two months. We managed to find one in Spain. We turned to Argentina for others" explains Samuel Pimentel, a headhunter who was searching for specialist consultants for a client. Pimentel's client asked for a list of candidates trained in"Agile" project management techniques for helping companies boost their productivity by using more IT systems. The client was even willing to pay $220,000 a year, almost 10 times the average salary in Spain, but Pimentel had a difficult time identifying candidates.The main reason for this issue according to Valentin Bote, head of research at Randstad, a recruitment agency, is that the unemployed lack the skills to fill the available positions."It's a paradox. The unemployment rate is too high. Yet we're seeing some tension in the labor market because unemployed people don't have the skills employers demand." Bote said. Companies are struggling to fill positions such as software developers, mathematical modelers, geriatric nurses and care workers. Although the unemployment rate is close to 20%, Randstad estimates that companies may struggle to fill almost 2 million posts through 2020.

Europeans are now fretting about Muslim girls in swimming pools -- Swiss authorities recently denied citizenship to a pair of Muslim sisters, 12 and 14, who refused to take part in their school's swimming lessons alongside boys of their age group in the city of Basel. According to USA Today, the girls had applied for citizenship a few months ago, but their request was denied this week. “Whoever doesn’t fulfill these conditions violates the law and therefore cannot be naturalized,” Stefan Wehrle, president of the naturalization committee, told TV stationSRF on Tuesday. Reports do not indicate the nationality of the Muslim family, but the episode is yet another reminder of both the country's tensions with its Muslim minority and the particularity of its laws regarding integration and citizenship. In a separate episode this week, a father of Bosnian origin was fined about $4,000 for having persuaded his daughters to boycott swimming lessons and camp trips. Under Swiss convention, the capacity to integrate into Swiss society plays a key part in determining naturalization. Earlier this year, an immigrant family in Basel had their naturalization applications turned down reportedly because they walked about town in "sweatpants" and didn't greet local passersby. Around the same time, the country was in an uproar over two Muslim boys who refused to shake the hands of their female schoolteacher, as is custom. The naturalization process of their father, an imam in a Saudi-funded Basel mosque, was suspended, according to reports. On Thursday, the Austrian town of Hainfeld voted to ban "burqinis" — Islamic swimwear that covers the body from head to toe — from being worn in local pools. Similar bans have been enacted elsewhere in Europe, including towns in Germany. The longstanding contention of proponents of such bans has been that burqinis are potentially unhygienic and do not conform to standard swimwear; critics argue that it's a not-so-veiled attempt at curbing Muslim religious expression. In Austria and other countries, asylum seekers have been subject to bans on access to pools over fears of sexual assault.

Bond yields sink as markets eye central bank action - Global stock markets climbed for a fourth day and government bond yields around the world hit their lowest levels in years on Friday, driven by the prospect of further cuts in interest rates and more central bank bond buying to support weak economies. Signs that the world's big central banks will go even easier on monetary conditions, extending an era of ultra-low interest rates, have helped drive a recovery for stock markets after a short bout of volatility following Britain's vote to leave the European Union last week. The 30-year Treasury yield hit its lowest since the 1950s at 2.189 percent. The yen climbed against the dollar and sterling was pinned near 31-year lows as the chances of a U.S. rate hike from the Federal Reserve receded and Britain's central bank hinted at a rate cut and more stimulus in the months ahead. European shares rose with the European Central Bank also reported to be looking at bond purchases. "The market is trying to front-run possible central bank actions," said Ed Al-Hussainy, a global rates and currency strategist at Columbia Threadneedle in Minneapolis. The 10-year U.S. Treasury yield fell to its lowest in four years, hitting 1.382 percent and taking it within striking distance of record lows. French and Dutch equivalents hit all-time lows. Those for others among Europe's struggling southern states also fell, with Spain's 10-year debt at its lowest in over a year.

Government bond yields fall to fresh record lows led by UK Gilts (FT) — Global government bond markets began the second half of the year extending their record-setting run, led by the UK and Japan, while the US Treasury benchmark yield also approached a fresh all-time low. The prospect of global central banks keeping interest rates lower for an extended period, led by a likely easing from the Bank of England this month, has spurred strong buying of top-tier sovereign debt by investors. Against a backdrop of UK political turmoil and with economists expecting a recession in the coming months, the 10-year gilt yield fell a further 6 basis points early on Friday to a record low of 0.81 per cent. That came after BoE governor Mark Carney spoke of “some monetary policy easing” in the next few months on Thursday. The rally in Gilts was accompanied by firmer US Treasury prices, with investors concerned that Brexit will slow global growth prospects and spark bouts of financial market volatility over the summer. The 10-year Treasury yield fell 12bp to 1.382 per cent, just above July 2012’s record low of 1.381 per cent, according to Reuters. Bond investors have ruled out the prospect of an interest rate rise this year by the Federal Reserve in the wake of Brexit. “We believe this is one of those key moments in global fixed income,” said Luis Costa, a strategist at Citi. “It looks to us we are at the tipping point, very close to another large leg down in US Treasury yields.”

Brexit: the demographic divide - FT - Britain has voted to leave the EU, after the Leave campaign won 51.9 per cent of votes in Thursday’s referendum. Votes were reported in each of 382 counting areas: 382 local government districts in England, Wales and Scotland, plus Northern Ireland as a single entity and finally Gibraltar. Between the UK’s census and other official national statistics, data is available on the demographic and socio-economic characteristics of most or all of these areas, allowing us to identify common factors among regions which voted one way or the other. Below are five of the most statistically significant of these factors. Polling ahead of the referendum had long since identified education as one of the fundamental drivers of voting intention, and the demographic data shows that this was absolutely the case. Out of more than 100 key social characteristics, the percentage of people with a degree was the most strongly associated with the share of voters who voted Remain. Unsurprisingly, the proportion of people in jobs classified as “professional occupations” — generally requiring a degree equivalent qualification — was the next strongest. After education and occupation, the share of people not holding a passport was the next most strongly correlated characteristic with the Leave vote. It may simply be a statistical quirk that sees the same statistic emerge as a strong indicator of both support for Britain First and the Leave campaign, but it may also be that we’re seeing proxy evidence of the nationalist theme that has been identified in some of Leave’s campaigning. These three are by some way the strongest associations with the pattern of the result across the country, but two more patterns are also worth mentioning. First, earnings. Before the vote several polls identified a common finding: people intending to vote Leave were much more likely than Remain voters to say they felt Britain’s economy was either stagnant or in decline.And finally, age. The generational divide on Brexit has been common knowledge throughout the campaign, and is apparent in the demographic data, even if only weakly. Had turnout been higher among younger people its influence would have been even greater, but as is usually the case, there was a slight general trend for turnout to increase in line with average age.

1. The UK remains a member of the EU for the time being. In purely legal terms, the referendum result has no effect at all: the vote was advisory, so, in principle, the government could have chosen to ignore it. In political terms, however, ministers could never have countenanced that.

2. The immediate effects of the result are political rather than legal: the Prime Minister has announced his resignation, and a motion of no confidence has been submitted in Labour leader Jeremy Corbyn. There was speculation before the referendum that David Cameron would be out of Downing Street within days after a vote for Brexit, but his decision to stay until his successor has been elected reflects much more than just personal preference. The Cabinet Manual is clear (at paragraph 2.10) that he cannot go until he can advise the Queen on who should form the new government.

3. The terms of the UK’s withdrawal from the EU and the nature of our future relationship with the EU will be worked out through negotiations with the remaining 27 member states, as set out in Article 50 of the Lisbon Treaty. The Prime Minister will trigger this by notifying the European Council (the collective body of the member states’ prime ministers or presidents) that the UK intends to withdraw. That will open a two-year window for negotiating withdrawal terms – a period that can be extended, but only with the unanimous support of all the member states. We will leave once a deal – which requires the support of the UK and a ‘qualified majority’ of the remaining 27 member states (specifically, at least 20 of them, comprising at least 65 per cent of their population) – is struck. If the two-year period comes to an end with neither a deal nor an extension, we will leave automatically on terms we may not like (see point 4).

Mapped: Brexit’s Aftermath -- The United Kingdom’s decision to leave the European Union sent world markets spiraling downward Friday. Across the globe, nearly every major stock index turned red. Shockwaves from the so-called Brexit were evident in Asia, Europe, and the United States. Not only did stocks suffer; currency in Europe did as well. On Friday, the pound sterling plummeted to its lowest levels since 1985. In the United States, the dollar surged, surpassing the demand for American products around the world because they become more expensive, meaning that U.S. companies will lose money. And that’s bad news for the U.S. economy. . The map below shows how the benchmark equity indices in major global economies fared after Britain’s historic decision. It’s not a pretty picture. Red indicates a loss. The darker the red, the more severe the drop: London’s primary index, the FTSE 100, closed Friday with a loss of 3.2 percent. Many European markets saw losses worse than London’s, as lucrative trade relationships came into doubt. Within the EU on Friday, Italy’s FTSE MIB and Spain’s IBEX both fell by more than 12 percent, with Spain’s benchmark posting the largest same-day drop in its history. Analysts told the Wall Street Journal that Spain, like other European countries, could see its companies’ revenues in Britain suffer over the coming months as earning there in the falling pound are transferred to euros. The DAX in Germany and the CAC in France turned sharply downward as well. Both African and Asian markets sank. For their part, leaders of the EU’s core institutions were swift to react to the vote, saying that they want Britain out “as soon as possible,” so that politics and markets can return to normal. There will be “no renegotiation,” Donald Tusk, Jean-Claude Juncker, and Martin Schulz — the respective heads of the European Council, Commission, and Parliament — and Dutch Prime Minister Mark Rutte, whose government currently holds the rotating presidency of the Council of the European Union, said in a joint statement on Friday, as reported by the Guardian. Any delay would serve only to “unnecessarily prolong uncertainty,” they said.

Brexit and the Future of Europe - George Soros – Britain, I believe, had the best of all possible deals with the European Union, being a member of the common market without belonging to the euro and having secured a number of other opt-outs from EU rules. And yet that was not enough to stop the United Kingdom’s electorate from voting to leave. Why? The answer could be seen in opinion polls in the months leading up to the “Brexit” referendum. The European migration crisis and the Brexit debate fed on each other. The “Leave” campaign exploited the deteriorating refugee situation – symbolized by frightening images of thousands of asylum-seekers concentrating in Calais, desperate to enter Britain by any means necessary – to stoke fear of “uncontrolled” immigration from other EU member states. And the European authorities delayed important decisions on refugee policy in order to avoid a negative effect on the British referendum vote, thereby perpetuating scenes of chaos like the one in Calais.German Chancellor Angela Merkel’s decision to open her country’s doors wide to refugees was an inspiring gesture, but it was not properly thought out, because it ignored the pull factor. A sudden influx of asylum-seekers disrupted people in their everyday lives across the EU. The lack of adequate controls, moreover, created panic, affecting everyone: the local population, the authorities in charge of public safety, and the refugees themselves. It has also paved the way for the rapid rise of xenophobic anti-European parties – such as the UK Independence Party, which spearheaded the Leave campaign – as national governments and European institutions seem incapable of handling the crisis. Now the catastrophic scenario that many feared has materialized, making the disintegration of the EU practically irreversible. Britain eventually may or may not be relatively better off than other countries by leaving the EU, but its economy and people stand to suffer significantly in the short to medium term. The pound plunged to its lowest level in more than three decades immediately after the vote, and financial markets worldwide are likely to remain in turmoil as the long, complicated process of political and economic divorce from the EU is negotiated. The consequences for the real economy will be comparable only to the financial crisis of 2007-2008

Brexit: Fear, Loathing, and Anger on Both Sides of the Channel - Yves Smith - The UK’s and Europe’s leaders have shifted into the crisis mode of urgent, high-staked weekend meetings. But rather than making progress, these officials have instead exposed gaping differences among the Continental powers and chaos at the top Britain’s Conservative and Labor parties. The UK’s political class is reeling from the Brexit vote. The major players in both parties now face having to manage a process that will prove to be difficult and stressful, where numerous details that will have profound long-term implications need to be sorted out. Even in a best case scenario, the results will make a lot of citizens less well off, and it won’t be just people working in the City who can arguably afford it (for instance, a recession is pretty much a given). This is not an attractive project for a career politician. Labor leader Jeremy Corbyn, who had a weak hold on his position even before the Brexit vote, beat back an insurrection by Hilary Benn, the shadow foreign minister and son of the Socialist icon Tony Benn. Corbyn removed Benn from the shadow cabinet. However, given that many Labor MPs want to hold Corbyn accountable for the Leave vote by virtue of making a lackluster case for Remain, he’s only fought off an immediate threat.* (In fairness, a must-read Guardian article we featured yesterday found that voters in the north and west, where Leave won, weren’t interested in what either party was telling them). The Conservatives are also in disarray. One of the unintended side effects of Cameron’s 90 day caretaker government is that the jockeying for leadership and backstabbing may continue for longer than if he had resigned immediately. From the Telegraph story Tories at War: The Tory civil war over the EU referendum escalated after friends of David Cameron accused Boris Johnson and Michael Gove of leading a “mendacious” campaign and “corroding” trust in politics. The Prime Minister’s allies claimed his “project fear” warnings that Brexit would bring economic disaster were proving to be a “reality” as the bitter feuding from the referendum campaign reached new heights…

Britain Rattles Postwar Order and Its Place as Pillar of Stability — Britain’s historic vote to leave the European Union is already threatening to unravel a democratic bloc of nations that has coexisted peacefully together for decades. But it is also generating uncertainty about an even bigger issue: Is the post-1945 order imposed on the world by the United States and its allies unraveling, too? Britain’s choice to retreat into what some critics of the vote suggest is a “Little England” status is just one among many loosely linked developments suggesting the potential for a reordering of power, economic relationships, borders and ideologies around the globe.Slow economic growth has undercut confidence in traditional liberal economics, especially in the face of the dislocations caused by trade and surging immigration. Populism has sprouted throughout the West. Borders in the Middle East are being erased amid a rise in sectarianism. China is growing more assertive and Russia more adventurous. Refugees from poor and war-torn places are crossing land and sea in record numbers to get to the better lives shown to them by modern communications.Accompanied by an upending of politics and middle-class assumptions in both the developed and the developing worlds, these forces are combining as never before to challenge the Western institutions and alliances that were established after World War II and that have largely held global sway ever since. Britain has been a pillar in that order, as well as a beneficiary. It has an important (some would argue outsize) place in the United Nations, and a role in NATO, the International Monetary Fund and the World Bank — the postwar institutions invested with promoting global peace, security and economic prosperity. Now Britain symbolizes the cracks in that postwar foundation. Its leaving the European Union weakens a bloc that is the world’s biggest single market, as well as an anchor of global democracy. It also undermines the postwar consensus that alliances among nations are essential in maintaining stability and in diluting the nationalism that once plunged Europe into bloody conflict — even as nationalism is surging again.

Globalization and its discontents: How the Trump/Brexit movements might herald New World Orders - Salon.com: Early this spring, when a Trump presidency seemed still just a chimera, I hosted a private dinner for over two dozen sitting ambassadors at a Washington hotel. The topic was the future of NATO. My guests all spoke of their great admiration for the United States, even those who were troubled by the Obama administration’s “pivot” to Asia. Ever briefly the talk was of Putin; then it gave way to my guests’ strange cocktail of amusement and shock at Trump’s unlikely ascent. “Americans will come to their senses,” said one Asian ambassador, dressed perfectly, standing for our parting toast and echoing the fallacy that the pundit class has been bellowing all year: This absurd and insurgent Trump candidacy, surely, is one bad news cycle away from fatal. Many ambassadors also argued that the British people would see sense and stay in the EU. Now, a new political reality unimaginable just months ago has set in overnight. Britain voted to quit the EU, a seismic shift in geopolitical world order. Prime Minister David Cameron stood somberly the morning after to announce his departure by October. The speculation is that the historic win, championed by non-establishment figures like Nigel Farage and the preternaturally colorful Boris Johnson, will presage a split of Scotland from Britain. Others fear the contagion of Euroscepticism could lead to other member nations severing themselves from the world’s largest trading body. Maybe so. Party leaders in France, Italy and the Netherlands are wasting no time in capitalizing on this sea change to trigger similar “Brexit” style referendum movements in their own countries. The enveloping irony around all of this, of course, is that Trump arrived in Scotland the day of the Brexit vote.

Scotland Threatens To Veto Brexit - Yesterday we warned that the biggest threat to the UK political process in the aftermath of the Friday referendum is neither an arguably fake petition to hold another referendum (it won't happen), nor the so-called buyer's remorse on the side of "Leave" voters, especially with ComRes confirming a negligible 1% of those voters were "Unhappy" with the outcome... ...but rather a surprising discovery in a UK government Command Paper laying out "The Process of withdrawing from the European Union", which goes through the process of invoking the infamous Article 50 of the Treaty on European Union, and notes that there may be a rather substantial hurdle to the actual Brexit process: a Scottish and/or Northern Irish veto to Britain's separation from the EU. To wit: We asked Sir David whether he thought the Scottish Parliament would have to give its consent to measures extinguishing the application of EU law in Scotland. He noted that such measures would entail amendment of section 29 of the Scotland Act 1998, which binds the Scottish Parliament to act in a manner compatible with EU law, and he therefore believed that the Scottish Parliament’s consent would be required. He could envisage certain political advantages being drawn from not giving consent. We note that the European Communities Act is also entrenched in the devolution settlements of Wales and Northern Ireland. Though we have taken no evidence on this specific point, we have no reason to believe that the requirement for legislative consent for its repeal would not apply to all the devolved nations. As it turns out, this warning was spot on, because earlier today Scotland's First Minister Nicola Sturgeon told the BBC that the Scottish Parliament could try to block the UK's exit from the EU. As a reminder, unlike England where the vote went 52% to 48% in Brexit's favor, in Scotland the picture was vastly different with 62% backing Remain and 38% wanting to go. And as predicted, the Scottish National Party leader, who went through her own UK independence referendum two years ago and is now considering yet another referendum, said that "of course" she would ask MSPs to refuse to give their "legislative consent".

UK Labour party revolts against leader Jeremy Corbyn following his dismal Brexit performance — A meltdown is taking place in the UK’s Labour party. Eleven shadow cabinet members have quit their positions, another was fired, and at least 20 resignations are still expected. Party leader Jeremy Corbyn, who as of Sunday (June 26) said he would not resign, is facing rising anger over his lackluster performance in the campaign against Brexit. The upheaval started after Corbyn fired his shadow foreign secretary, Hilary Benn, on Sunday, based on reports that Benn had been plotting to force Corbyn’s resignation. Since then, nearly a dozen key members of the shadow cabinet—Labour’s voice in government policies—have announced their resignations. Shadow health secretary Heidi Alexander went first, posting her resignation letter on Twitter. She was swiftly followed by other MPs, with reports of more resignations ahead. Angela and Maria Eagle, Chris Bryant, Vernon Coaker, Charlie Falconer still expected to resign. Corbyn is under fire for his weak performance campaigning against Brexit, as well as his reaction to the vote: On Friday he demanded that Britain start negotiating the terms of its EU exit immediately, and then later reversed his position. “I did all I could,” Corbyn offered the heckling crowd at a gay pride march in London on Saturday.“Every speech Jeremy has made since the result has made this worse,” one shadow cabinet minister told The Times of London Given the UK’s difficult road ahead, it’s a bad time for the opposition party to be in shambles. Several Labour MPs are hoping to replace Corbyn quickly, in part because Cameron’s resignation could lead to a snap general election. On BBC One’s The Andrew Marr Show on Sunday, Benn said there’s “no confidence” that Labour can win a general election with Corbyn at the helm. “He’s a good and decent man, but he is not a leader,” he said.

Death to All Zombies! --Kunstler - Wait a minute. They’re already dead. Brexit just reveals that not everybody’s brains have been eaten. A viral contagion now threatens the zombified institutions of daily life, especially the workings of politics and finance. Just as zombies exist only in the collective imagination, so do these two principal activities of society operate mainly on trust, an ephemeral product of the hive-mind. When things fall apart in stressed complex systems, they tend to fall apart fast. It’s called phase change. Too many things in 21st century life have depended on sheer trust that the people-in-charge know what they are doing. That trust has subsisted on the doling out of money-from-nothing: debt, reckless bond issuance. TARP, QEs, bailouts, bail-ins, Operation Twists, Ponzi schemes… the whole sad-ass armamentarium of banking necromancy. The politicians let it get out of hand. Things that can’t go on don’t, and now they won’t. The politics of Great Britain are now falling apart landslide-style. Since just about everybody in or near power can be blamed for the national predicament, there’s nobody to turn to, at least not yet. The Labour party just acted out The Caine Mutiny, starring Jeremy Corbyn as Captain Queeg. The Tory Cameron gave three months notice without any plausible replacement in view. Now Cameron’s people are hinting in the media that they can just drag their feet on Brexit, that is, not do anything to enable it from actually happening for a while. Of course, that’s what the monkeyshines of banking and finance have done: postponed the inevitable reckoning with the realities of our time: growing resource scarcity, population overshoot, climate change, ecological holocaust, and the diminishing returns of technology.

Boris “Just Kidding” Johnson Outlines His Rainbows and Unicorns Brexit Plan -- Yves Smith - Boris Johnson is now the most hated person in the Western world. He is attempting to do something about that in the UK via an article in the Telegraph that says that Brexit will usher in the best of all possible worlds for the UK. I’m not making that up. Johnson says citizens will get to keep all the things they love, like freedom of movement between countries and affordable European products, and get rid of what they don’t, meaning those EU nasty rules and courts. This is so far from anything credible that I wonder if part of Johnson’s motive for writing it isn’t just to reduce his personal risk but to disqualify himself for leadership of the Conservative party. He’s in the position of being the dog that caught the car. And it’s hard to see how he can be effective with the white-hot anger at him. As one reader said: I have been talking to some of my neighbours in London and am astonished how many are talking about leaving the country. The atmosphere is more febrile by miles than at any time since I arrived here half a century ago. Johnson, once a favourite of the crowds in London, is being booed very aggressively by large crowds when he appears outside his house and clearly requires police protection. He may have to be moved to other accommodation for his safety.And yes there are people now talking openly in the streets that they are going to throw the foreigners out.The mood is very ugly. Remainers are saying that the country have been lied into voting to leave the EU and are openly challenging the vaiidity of the referendum result.

Pound bounces as Cameron holds talks in Brussels on Brexit --- Sterling has bounced off its lowest point in more than three decades, steadying a little after turmoil triggered by Britain’s decision to leave the EU. . The pound rose 1 per cent on the session to $1.3343, reducing its decline against the dollar since the start of trade on Friday when the result of the referendum became clear, to 10.1 per cent. David Cameron has arrived in Brussels for a final, painful summit as UK prime minister, where he will urge European leaders to learn the lessons of Britain’s referendum and give his analysis of the Brexit vote at a summit dinner. European leaders hope to push ahead with formal negotiations and Downing Street expects Mr Cameron’s successor to come under heavy pressure the moment they take office. With populist and anti-EU sentiment rising across Europe, the prime minister is also expected to warn that many British voters felt alienated by a remote elite in Brussels pursuing an apparently relentless project of integration. On Wednesday, Mr Cameron will be asked to leave the summit while the remaining 27 members hold informal talks on how to approach Brexit negotiations and how to stop them stretching out over many years. George Osborne, the chancellor, has warned that spending cuts and tax rises lie ahead in the wake of the EU membership referendum, noting that the country will be “poorer” as a result of the vote. Mr Osborne on Monday backed away from plans for an emergency Budget, saying that a new prime minister needs to be in place first. But a dent to the economy is unavoidable. “We are in a period of prolonged economic adjustment for the UK,” he said in an interview on BBC radio. He added: “We are absolutely going to have to provide fiscal security to people, we are going to have to show the country and the world that the government can live within its means.”

Nice banking passport you had there… ‘Passporting’, per Citi, “allows financial institutions incorporated in one member state to establish branches in other member state and provide cross-border services to clients.”The fact that system now most probably needs to be renegotiated — where once there was cohesion, now there is confusion — is bad news for UK banks and the EU/ US banks that operate out of London. It’s why they say things like, “in all likelihood we would ”. They being Goldman there in 2013 but whatever, the risk is obviously real. So how would it all work? From Citi: Any operational impact will depend on the success of the UK’s renegotiation of existing passporting rights. The different options for a relationship in and outside of the EU are often discussed in the media, but with little certainty on the feasibility of these options, or on the possible impact to the UK economy and negotiating powers. Once Article 50 of the EU Treaty is triggered, the UK will enter a 2-year negotiation period, in order to set the terms of the UK’s exit. One would assume ‘passporting’ rights between the UK and C-EU would likely be renegotiated in parallel to this, although any final agreement could take multiple years. In the table below we outline a range of possible scenarios, all of which have pros and cons. Switzerland, for example, operates via 120+ bilateral agreements, managed by 27 joint committees. This preserves sovereignty, but constant renegotiation of these agreements can prove bureaucratic and time consuming. It also still does not offer full access to the single market for banking services. Norway is part of the EEA/EFTA, which provides single market access, but means adopting EU standards and regulation with virtually no political influence. The Canada-EU trade deal, often cited by the Leave campaign as a potential example, does not cover services, so the City would still have no access to the EU single market.

Do Sovereign Credit Downgrades Tell Us Very Much? Surprisingly Not - : Standard & Poor’s decision to strip the United Kingdom of its AAA credit rating in the wake of the country’s vote to leave the European Union has highlighted once again the limited value of sovereign credit ratings. Countries that have defaulted since 1975 had non-investment credit rating grades (below BBB) a year before they defaulted, the IMF found in 2010, but that doesn’t mean rating agencies reveal anything markets don’t already know. Far from raising doubts about the U.K.’s creditworthiness, investors have continued to lap up gilts in the wake of S&P’s decision to cut its sovereign rating for the U.K. two notches to AA. Yields on the U.K. government’s 10-year bonds are still hugging 0.95% in the wake of S&P’s announcement, below the historic 1% threshold breached for the first time last week. In other words, rating changes appear to follow — rather than lead — market moves. Credit-default swap prices on U.K. bonds, the market’s best estimate of the probability of default, had incorporated the impact of Brexit even before rival rating agency Moody’s — which had already withdrawn its top rating — put the U.K. on ‘negative watch’ on Friday. Two notches is quite a rebuke, too, not to mention competitor Fitch cut its credit score for the U.K. on the same day. Perhaps the biggest sign of a relevance deficit came in August 2011, when S&P stripped the U.S. government of its AAA rating amidst heightened risk Congress would refuse to lift the debt ceiling. Yields on U.S. government bonds actually fell in following days, by around 20 basis points. And remarkably, U.S. government CDS spreads flat-lined.

Economic implications of Brexit - Bernanke - After several days of market upset, a few reflections on last week’s momentous vote in Great Britain. Even more obvious now than before the vote is that the biggest losers, economically speaking, will be the British themselves. The vote ushers in what will be several years of tremendous uncertainty—about the rules that will govern the U.K.’s trade with its continental neighbors, about the fates of foreign workers in Britain and British workers abroad, and about the country’s political direction, including perhaps where its borders will ultimately lie. Such fundamental uncertainty will depress business formation, capital investment, and hiring; indeed, it had begun to do so even before the vote. The U.K. economic slowdown to come will be exacerbated by falling asset values (houses, commercial real estate, stocks) and damaged confidence on the part of households and businesses. Ironically, the sharp decline in the value of the pound may be a bit of a buffer here as, all else equal, it will make British exports more competitive. In the longer run, the uncertainty will dissipate, but the economic costs to the U.K. still will exceed the benefits. Financial services and other globally oriented industries, which depend on unfettered access to European markets and exchanges, will come under pressure. At the same time, the purported gains from freeing the U.K. from the heavy regulatory hand of Brussels will be limited, because Britain will likely have to accept most of those rules (without ability to influence them) as part of restructured trade agreements. Immigration is unpopular in the U.K., and slowing it was a motivation for some “leave” voters, but a more slowly growing labor force likely would also reduce overall economic growth.

Brexit adds to existing troubles faced by banks -- As stock markets have tumbled in the aftermath of the decision to leave the EU, crashing bank stocks have created some of the largest reverberations. The value of Barclays and Royal Bank of Scotland have dropped more than 30 per cent since the vote. Fears were not limited to the UK; the main European banks index lost 23 per cent by the end of Monday, after trading at its lowest level since the eurozone crisis. But Mr Dyer, a portfolio manager at Eaton Vance, had not invested in UK banks for several months. “We had had a negative view on European and UK bank equities year to date, driven by an unfavourable year, increasing regulations, increasing capital requirements and a low interest rate environment,” he says. “None of those factors are positive for increasing profits in banks.” His perspective highlights how the vote to leave comes at a sensitive time for financial institutions, the latest danger for a sector which was already under pressure to generate profits as bond yields collapsed towards zero, or below. So if the sector was already struggling, what do the recent sharp falls, followed by a rebound of some 4 per cent in the StoxxEuro bank index early on Tuesday — after Brexit — mean? First, banks have become the knee-jerk choice of asset to sell as investors seek to reduce exposure to economic weakness. “Clearly financials being the most interlinked across Europe are the ones that are taking the brunt of it at the moment,”

Expectations of central bank stimulus drive down euro zone bond yields | Reuters: Southern Europe's borrowing costs fell sharply for a third straight day and French bond yields hit record lows on Wednesday, as expectations grow that central banks will act to shore up confidence and the economy after Britain's Brexit vote. Spanish government bond yields, down almost 40 basis points so far this week, tumbled to their lowest levels in more than a year and Portuguese yields slid 11 bps to a one-month low. Yields on Germany's top-rated bonds were a tad higher but within range of last week's record lows as the uncertainty triggered by British voters' decision to leave the European Union kept safe-haven debt in demand. "In the weeks ahead investors are likely to shift between stimulus hopes and concerns about the fallout from Brexit," said Martin Van Vliet, senior rates strategist at ING. European Central Bank President Mario Draghi said on Tuesday that Britain's decision to leave the European Union could reduce euro zone growth by a cumulative 0.3 to 0.5 percent compared to previous estimates over the next three years. Investors now fully price in a rate cut in Britain and the euro zone by the end of this year. The Brexit vote could also be a drag on the U.S. economy, Federal Reserve governor Jerome Powell said on Tuesday -- a comment that reinforced market expectations the Fed will no longer be able to hike rates this year and may even be forced to cut if the domestic economy falters.

Prospect of more ECB action drive French, Irish yields to record lows | Reuters: Borrowing costs across the euro zone fell on Wednesday, with Irish, French and Dutch 10-year bond yields hitting record lows on hopes for more European Central Bank stimulus to limit the fallout from Britain's vote to leave the European Union. With yields in Germany - the benchmark issuer in the euro area - already in negative territory out to 10 years, investors piled into other euro zone bonds in search of return. Fitch Ratings said on Wednesday the Brexit vote had pushed negative-yielding debt globally to $11.7 trillion, adding the growing amount of long-term bonds with a negative yield underscored the challenges facing investors. Ireland's 10-year bond yield fell to record low 0.6 percent , France's fell as low as 0.21 percent and Dutch yields fell to 0.09 percent. "With 10-year German yields in negative territory, investors need a yield elsewhere," said Nordea's chief fixed income analyst Jan von Gerich. Germany's 10-year yield was down 0.1 basis points at minus 0.13 percent. Several banks expect it to fall further as Brexit dents the outlook for growth and inflation, raising expectations of an ECB rate cut. But a number of sources told Reuters the ECB has taken comfort in the calmer-than-expected market reaction to the British referendum and is in no rush to ease its monetary policy. ECB President Mario Draghi said on Tuesday Britain's decision to leave the EU could reduce euro zone growth by a cumulative 0.3 to 0.5 percent compared to previous estimates over the next three years.

German Bund yields forecast to fall further sub-zero, ratcheting up pain for ECB | Reuters: German 10-year government bond yields could fall close to minus 0.5 percent in the wake of last week's Brexit vote, pressuring the ECB to cut its deposit rate to ensure it can complete its 1.7 trillion euro stimulus scheme. Several big banks have lowered their forecasts for the German 10-year yield, the euro zone's most important market interest rate, since Britain's shock vote drove it to a record low of minus 0.17 percent as investors piled into an asset viewed as one of the safest in the world. A further slide in yields would make the already acute scarcity of eligible bonds for the European Central Bank's asset purchase programme even more pressing in Germany, the biggest economy in the euro zone and where most purchases are made. More than half the German government bonds that might have been eligible for the ECB to buy are out of range because they yield less than the central bank's deposit rate, Swiss wealth manager Pictet calculates. The ECB, which also buys corporate and other bonds, has set itself limits on what it can buy, including the yield floor. JPMorgan expects German 10-year yields to fall to minus 0.15 percent by the end of the third quarter from a previous forecast of a positive 0.15 percent. Bunds yielded minus 0.12 percent on Wednesday. Bank of America Merrill Lynch and DZ Bank see 10-year yields falling to minus 0.25 percent in the coming months, while Rabobank expects them to fall to minus 0.3 percent from a previous forecast of minus 0.1 percent this year.

Fitch: Brexit Vote Pushes Negative-Yielding Debt to $11.7 Trn | Reuters: Investors' flight to safe assets following the UK's EU referendum on June 23 pushed the global total of sovereign debt with negative yields to $11.7 trillion as of June 27, up $1.3 trillion from the end-May total, according to new analysis by Fitch Ratings. Brexit-related concerns drove more long-dated bond yields negative, with particularly big shifts in German, French and Japanese yield curves during June. Worries over the global growth outlook, further fueled by Brexit, have continued to support demand for higher-quality sovereign paper in June. Widespread adoption of unconventional monetary policies, including large-scale bond-buying programs and negative deposit rates, have driven the large increases in negative-yielding debt seen this year. The chart below highlights the monthly changes in the outstanding par amount of negative-yielding sovereign debt by maturity bucket. The biggest drivers of the total increase during June were seen in longer-dated bonds. For example, German 10-year bund yields swung into negative territory and sub-zero yields moved further out on the curve for Japan -- now out to 17 years. Also, in Switzerland, virtually all sovereign debt carried a negative yield on June 27.

Brexit or Fixit - Many commenters compare Brexit to the American revolution. I think the constitutional convention is a better analogy for the moment and challenge ahead. A first attempt at union resulted in an unworkable Federal structure. Europe needs a constitutional convention to fix its union. The EU's first attempt was basically aristocratic/technocratic. Brussels tells the peasants what to do. The EU needs a hardy dose of accountability, representation, checks and balances -- all the beautiful structures of the US Constitution. What little thought the EU put in to these matters is clearly wanting. America did not wait for a state to leave. But, though even the Pope admits the EU structure wasn't working, the EU needed this wake up call. Bring the UK to the convention, and bring them back. Fixit. (#Fixit?) Out of control economic regulation, labor laws, mandated social programs and "60% of British laws are made in Brussels" (I don't know the source of the widely quoted number, but the sentiment is as important as the fact) are the most sensible arguments I heard for Brexit. Fraser Nelson's WSJ essay expressed this well: The Brexit campaign started as a cry for liberty, perhaps articulated most clearly by Michael Gove, the British justice secretary... Mr. Gove offered practical examples of the problems of EU membership. As a minister, he said, he deals constantly with edicts and regulations framed at the European level—rules that he doesn’t want and can’t change. These were rules that no one in Britain asked for, rules promulgated by officials whose names Brits don’t know, people whom they never elected and cannot remove from office. Yet they become the law of the land. Much of what we think of as British democracy, Mr. Gove argued, is now no such thing. The important point, I think, is not the outcome -- too much silly regulation, labor laws, and so on. The process is the important point.

It's time for London to leave the UK and stay in the EU | Voices | The Independent: It’s hard to digest what happened this morning in the UK, especially when Boris Johnson and Michael Gove – the supposed triumphant victors of the whole charade – are standing in front of you looking like they’re speaking at a funeral. This is a “glorious opportunity for Britain”, Boris said in the tone of a political prisoner reading out a false confession. And in many ways he is a prisoner of his own politics. He played with the idea of Brexit, probably expecting a narrow victory for Remain and the opportunity to ride the momentum of angry pro-Leave sentiment right to the Prime Minister’s office. Now, instead, he faces the possibility of actually having to steer Britain out of the EU and into a brave new world of probable recession, continued austerity and isolation from our nearest neighbours. BoJo – who mentioned that he wanted to speak to people who didn’t vote for a Brexit, “especially young people”, which said it all – genuinely told us that the results of this referendum don’t make us “any less united [as the UK] or any less European”. Funnily enough, Nicola Sturgeon – who practically skipped onto the podium – doesn’t agree. Her rousing speech about how Scotland had voted overwhelmingly to stay within the EU, how she deeply regretted the UK-wide results, and how a second referendum on Scottish independence was on the horizon, was markedly more animated than Gove, Boris or even Farage’s reactions. And if this is a moment for Scotland, why not for others? There have been murmurs of the possibility of Northern Ireland voting to join the Republic after their own votes went a similar way to the Scottish. Meanwhile, many cosmopolitan Northern cities – Manchester, Liverpool and my own hometown of Newcastle included – voted Remain. Most markedly, my new, adopted hometown of London voted overwhelmingly to stay: 60 per cent of boroughs voted against a Brexit, and in my constituency of Hackney 78.5 per cent voted against Brexit. 94 per cent of the borough of Southwark did the same.

How to block the Brexit, according to constitutional expert -The House of Commons and the House Lords could block Britain from leaving the European Union because there is no mandate on how the so-called Brexit should be carried out, a constitutional expert has told Business Insider. "The detail of a Brexit is totally unclear," Dr. Peter Catterall of the University of Westminster said Monday in a Facebook Live interview with Lianna Brinded at Business Insider. "We know that the civil service has done absolutely no planning for a Brexit and are not in a position to advise the present government or the incoming government on how this could be done." The main problem, Catterall said, is that the referendum result, which itself is not legally binding, stated only that a Brexit should happen, leaving out exactly how it should happen: "On the one hand, the legislation which set up the referendum did not specify what value we have to place on it or a road map of what happens thereafter. All it did was offer a binary choice: leave or remain. The reason it did that was because you couldn't have specified the detail of all that a Leave vote would require. So it couldn't be binding. But MPs on both sides of the Commons say they regard this vote as a mandate." The problem with that, Catterall said, is that the method of leaving the EU was not on the ballot paper: "Now we will get a change of government in the autumn to something people didn't vote for," he said. "It looks like we're going to get a more hardline Tory government, and if that had been on the ballot paper, it probably wouldn't have succeeded." So what does this mean? Quite simply, that in a parliamentary constitution, elected members of Parliament have every right to ignore the outcome of a referendum.

EU to UK on Brexit: “What About ‘Nein’ Don’t You Understand?” - Yves Smith - As we described yesterday, it was evident when British Prime Minister Cameron spoke at a regularly scheduled session of the European Parliament that Cameron’s demand for what amounted to a special deal as part of a Brexit, in terms of concessions on immigration, was a non-starter as far as the Europeans were concerned. We inferred from the write-ups of the meeting in what is effectively the house organ of the Conservative party, the Telegraph, that the Tories were ignoring the message. Apparently it was so clear at the European Parliament meeting itself that the UK representatives were in their own bubble that European officials took the atypical step of not simply reiterating their position, but stating it even more firmly in an effort to puncture the delusion. From EU leaders harden stance against Brexit concessions in the Financial Times: Europe’s leaders have dug in their heels over uncontrolled migration in the single market, scotching UK hopes for a favourable deal in a direct snub to prime minister David Cameron’s plea to recognise British voters’ concerns..“There will be no single market à la carte,” said Donald Tusk, the EU Council president, as the group met to set out the terms of engagement for any divorce talks following the Brexit referendum.Diplomats said the joint statement was deliberately toughened up after Mr Cameron said he would have avoided Brexit if European leaders had let him control migration.With the explicit consent of German chancellor Angela Merkel, a sentence was unexpectedly added to the statement yesterday saying that “access to the single market requires acceptance of all four freedoms”, a reference to EU principles on the free movement of capital, labour, services and goods. This is very significant from a negotiating perspective. Details can always be horse-traded but principles are another matter entirely, and the EU members are taking a unified position.

Brexit: Does Invoking Article 50 Require the Approval of Parliament? -- Yves Smith As we’ve mentioned, reporting in the UK on Brexit has become so partisan that it is hard to sort out some basic questions. So far, there has been no mention by Prime Minister Cameron of a need by Government to seek Parliamentary approval for invoking Article 50 which triggers the two-year European Union departure process, nor can I recall the intent to seek approval mentioned by either of the two leading contenders for his post, Boris Johnson or Theresa May. Constitutional experts diverge on the question. Reader vlade provided a link to this article today, Nick Barber, Tom Hickman and Jeff King: Pulling the Article 50 ‘Trigger’: Parliament’s Indispensable Role, from the UK Constitutional Law Association’s website. From the beginning of the article:In this post we argue that as a matter of domestic constitutional law, the Prime Minister is unable to issue a declaration under Article 50 of the Lisbon Treaty – triggering our withdrawal from the European Union – without having been first authorised to do so by an Act of the United Kingdom Parliament. Were he to attempt to do so before such a statute was passed, the declaration would be legally ineffective as a matter of domestic law and it would also fail to comply with the requirements of Article 50 itself.There are a number of overlapping reasons for this. They range from the general to the specific. At the most general, our democracy is a parliamentary democracy, and it is Parliament, not the Government, that has the final say about the implications of the referendum, the timing of an Article 50 our membership of the Union, and the rights of British citizens that flow from that membership. More specifically, the terms and the object and purpose of the European Communities Act 1972 also support the correctness of the legal position set out above. However, another Constitutional law expert disagrees as to the nature of the matter and hence what considerations apply. From The road to Brexit: 16 things you need to know about the process of leaving the EU by The Constitution Unit, which describes itself as “The Constitution Unit in the Department of Political Science at University College London is the UK’s leading research body on constitutional change:”

Brexit: The end of globalization as we know it? -- The British vote to leave the European Union is a watershed event—one that marks the end of an era of globalization driven by deregulation and the ceding of power over trade and regulation to international institutions like the EU and the World Trade Organization. While there were many contributing factors, the 52 percent vote in favor of Brexit no doubt in part reflects the fact that globalization has failed to deliver a growing standard of living to most working people over the past thirty years. Outsourcing and growing trade with low-wage countries—including recent additions to the EU such as Poland, Lithuania, and Croatia, as well as China, India and other countries with large low-wage labor forces—have put downward pressure on wages of the working class. As Matt O’Brien notes, the result has been that the “working classes of rich countries—like Brexit voters—have seen little income growth” over this period. The message that leaders in the United Kingdom, Europe, and indeed the United States should take away from Brexit is that the time has come to stop promoting austerity and business-as-usual trade deals like the Trans-Pacific Partnership (and the now dead Transatlantic Trade and Investment Partnership) and to instead get serious about rebuilding manufacturing and an economy that works for working people.

Goldman Sachs forecasts UK recession in 2017, downgrades global growth forecasts: The U.K. is likely to enter a "mild recession" by early 2017, following its vote leave the European Union (EU), Goldman Sachs economists wrote in a report released Sunday. The bank's economists also downgraded its global growth forecast by 0.1 percentage point to 3.1 percent in 2016. U.K. gross domestic product (GDP) would take a 2.75 percentage-point hit in the next 18 months from the cumulative effects of "increased uncertainty and deteriorating terms of trade," Goldman Sachs' Jan Hatzius, Jari Stehn and Karen Reichgott wrote. Goldman's forecast for GDP growth in the U.K. this year was 1.5 percent, a 0.5 percentage-point drop from its previous forecast, while the bank's prediction for U.K. growth next year is 0.2 percent, a 1.8 percent decline from its previous forecast. The economists listed three "economic transmission mechanisms" from the shock Brexit vote. "First, the UK terms of trade are likely to deteriorate, especially if it becomes harder to export high-value added services (including financial services) to the European Union," the note said. "Second, the uncertainty about the long term is likely to weigh on UK growth in the short term as firms hold off on investment...Third, outside the UK the main transmission channels are weaker UK demand for imports and—much more importantly—a tightening of financial conditions via a stronger exchange rate and lower risk asset prices."

Brexit market shock may push world into recession, says this economist: Friday's hefty global equity losses may push the world economy into a contraction, the chief economist of an economics research firm said. Stocks and stock futures tumbled on the shock news that the U.K. had voted in Thursday's referendum to leave the European Union. The pan-European STOXX 600 index closed 7 percent lower, with the U.K.'s benchmark FTSE 100 dropped 3.2 percent. "We have been wary of the risks of a global economic recession for some time," Carl Weinberg of High Frequency Economics said in a note Friday. "We think the time has come to consider that a financial market crash today may push a world economy teetering on the verge of a contraction over the edge," he said.World trade declined by 1.1 percent in the first quarter of 2016 compared with the previous three months. Weinberg said this shrinkage, which he attributed to the multiyear commodity price crash, provided an early indicator of economic distress. "The global economy has been pretty disappointing in recent year(s), even in generally prosperous financial market conditions. Today's situation is different from yesterday," he said. "In our view, a slam to global wealth will bring a tightening of global financial conditions, discourage risk-taking and investment, and force a retraction of credit and leverage." Other analysts disagreed: Capital Economics, for instance, circulated a report on Friday headlined "'Brexit' is not a disaster for the world economy.'" "Once the dust has settled, the global economic implications of the U.K.'s vote to leave the European Union are likely to prove much less dramatic than many had suggested during the past few weeks,"

Standard & Poor's cuts EU credit rating after British vote to leave - The European Union has suffered a downgrade of its long-term credit rating following the UK’s Brexit vote last week. In a move that will increase the borrowing costs for the 28-member bloc, the credit ratings agency S&P said the EU should see its status as a safe haven for investors reduced to AA from AA+. The agency said: “After the decision by the UK electorate to leave the EU … we have reassessed our opinion of cohesion within the EU, which we now consider to be a neutral rather than positive rating factor.” International investors use credit agency reports to gauge the safety of their funds and the likelihood that their investments will become insolvent. Pension funds and other investors typically move their money to safe havens in times of uncertainty. But concerns that the ripple effects of the Brexit vote will hit the profits of corporations in Europe, the US and Japan and hurt government finances have grown in recent days. Earlier this week S&P became the last of the three major ratings agencies to strip the UK of its last AAA rating as it warned that the economic, fiscal and constitutional risks the country faced had increased following the EU referendum result. The UK was placed on negative watch, which puts the government on notice of possible further downgrades, after S&P described the result of the vote as “a seminal event” that would “lead to a less predictable, stable and effective policy framework in the UK”.

Brexit: EU leaders say UK cannot have 'à la carte' single market | Politics | The Guardian: European leaders have said they expect Britain to notify them of its intention to leave as early as September, and insisted the UK has no prospect of keeping access to the single market unless it continues to accept EU migration. Meeting in Brussels without Britain for the first time, the EU’s 27 remaining members also said no negotiations on the terms of the UK’s future relationship with the EU would start before it had triggered article 50 of the Lisbon treaty, the mechanism for leaving the union. “As soon as Britain’s new government is formed, it must file its notification and open the two-year negotiating period laid down in the treaty,” François Hollande, the French president, told an end-of-summit press conference. “So we expect this to happen in early September.” Donald Tusk, the EU council president, added that the leaders had made it “crystal clear” that access to the single market “requires acceptance of all four EU freedoms – including freedom of movement. There can be no single market à la carte.” The German chancellor, Angela Merkel reiterated that if Britain wanted to maintain single market access, “there will have to be trade offs elsewhere”. Europe would now wait to hear, she said, “what kind of model Britain wants.” Although there is broad acceptance that Britain needs breathing space to appoint a new prime minister and establish what kind of future deal it hopes for, most members want Brexit under way quickly to contain the risk of Eurosceptic contagion, limit economic instability and allow the EU to move forward with new initiatives on security, growth and jobs.

The Macroeconomics of Brexit: Motivated Reasoning? - Krugman - I believe that Brexit is a tragic development, which will do substantial long-run economic harm. But what we’re hearing overwhelmingly from economists is the claim that it will also have severe short-run adverse impacts. And that claim seems dubious.Or maybe more to the point, it’s a claim that doesn’t follow in any clear way from standard macroeconomics – but it’s being presented as if it does. And I worry that what we’re seeing is a case of motivated reasoning, which could end up damaging economists’ credibility.OK, let’s start at the beginning. Brexit will almost certainly have an adverse effect on British trade; even if the UK ends up with a Norway-type agreement with the EU, the loss of guaranteed access to the EU market will affect firms’ decisions about investments, and inhibit trade flows.This reduction in trade relative to what would otherwise happen will, in turn, make the British economy less productive and poorer than it would otherwise have been. It takes fairly heroic assumptions to make this into a specific number, but 2-3 percent lower income in perpetuity seems plausible.So far, so good, or rather so bad: this is standard economics, basically Ricardo with a dash of new trade theory. But what about warnings that Brexit will precipitate a British recession, or at least a drastic slowdown in the short run? Where are those coming from?The trade arguments are about the economy’s supply side: less trade means lower productivity and hence lower productive capacity. But the kind of recession we’re talking about here is a demand-side phenomenon – a slump brought on by inadequate spending. And why, exactly, is that supposed to happen?As best I can tell, the case for a UK recession or at least slowdown rests on two not entirely distinct propositions: the idea that uncertainty will deter investment and possibly consumption, and the idea that an increase in perceived risks will worsen financial conditions. Let’s take these on in turn.

Brexit and the Idea of European Disintegration - Britain has voted to leave the European Union (EU), or more accurately, England has voted to leave. The majority in Scotland, Northern Ireland and Gibraltar voted to remain. The opinion polls, the bookies and the markets did not predict this outcome. The mood of the nation, it would seem, is becoming increasingly difficult to measure. Or is it?There is a lot of data suggesting that ‘immigration’ was the dominant concern for those who voted to leave the EU. This should not be too surprising. In the latest Eurobarometer data, immigration was cited as the main concern of UK citizens, alongside Germany and Denmark.According to YouGov data, which is more revealing, income was the best predictor as to whether someone intended to vote to leave or remain. Basically, the lower your income, the more inclined you were to vote leave. Some have referred to this category as ‘those with lower education’. But let’s be honest, it’s called social class.Another predictor as to whether someone was more inclined to vote leave was age. Younger, more liberal voters, were much more supportive of remaining in the EU. The only problem with this category of voter, is that they failed to turn out en masse to vote at all. According to the data, electoral turnout among 18-25 year olds was pitiful. Older workers were much more inclined to vote.The precise data on how particular communities and constituencies across England voted is perhaps most revealing. The poorest twenty districts in England overwhelmingly voted to leave the EU. Or to get at it another way, according to this report, those areas with the most stagnant wages are the same communities with the most anti-EU attitudes. The core inference is that England is a deeply class divided society, and that the poorest in England are increasingly venting their anger at immigrants and the EU. Further, and what is not captured in the above data, is that right-wing political parties are now mobilising working class England.

Brexit: Huge Spanner in the Works – Negotiation of New UK Trade Deals Verboten Till Exit Complete --Yves Smith - The BBC has a bombshell report that has not yet gotten the attention it warrants. As we have stated, there was a big timing issue with a Brexit even based on a superficial look at the mechanics. As President of the European Council Donald Tusk made clear, the UK would be able to complete the steps necessary to leave the EU in two years. That matters because once the UK invokes Article 50, a two year clock starts running. If the departing country has not negotiated its exodus with the rest of the EU, it is out by default. While the two years can be extended, it would take a unanimous vote of all 27 remaining members. Give the lack of good will towards the UK, and the desire of the remaining members to use their negotiating leverage, it would be extremely dangerous for Britain to assume it could get additional time.Mind you, the process of unwinding the current relationship between the UK and the EU is a tall order. Then the UK also has to enter into new arrangements not just with the EU but other trade partners, since most of those relationships were not bi-lateral but through the EU. Hence Obama’s threat, that the UK would go to the back of the line in negotiating a new relationship if it left the EU, was a serious matter. Experts estimated the bare minimum amount of time for negotiating and consummating new trade deals was five years, and that that would be very unlikely to be achieved in practice. Moreover, trade negotiations can fail, which means there is a a possibility of it taking much longer. So the UK was already faced with a gap of at least three years, and more likely longer than that, between when it left the EU and had a new trade regime in place, particularly with its most important trading partners on the Continent. But the BBC interview with the EU’s most senior trade official reveals it’s even worse than that. The negotiations of the UK’s departure from the EU and new EU trade arrangements cannot take place in parallel. They must be sequential. No new deal talks with the EU until the exit is completed.

EU ready to go all the way : The European Union is ready to make difficult concessions to conclude talks on the Transatlantic Trade and Investment Partnership with the United States by the end of the year, despite the uncertainty thrown into the negotiations by the United Kingdom’s decision to leave the EU, European Trade Commissioner Cecilia Malmström said Wednesday. “We are prepared to make the political choices needed to close this deal,” Malmström said in a speech at the Atlantic Council after talks Tuesday with U.S. Trade Representative Michael Froman, who also recently reaffirmed the goal of trying to finish in 2016. Malmström acknowledged the U.K.’s decision has thrown a cloud of uncertainty over the already complex talks. But for now, the EU will continue to negotiate on behalf of the U.K. until it formally exits the union, a process that could take at least two years, she said.

Italy's Northern League To Launch EU Referendum Campaign Next - Shortly after the final Brexit result was released, first Netherlands and then France quickly warned they too would proceed with their own referenda. They are not alone: moments later the head of Italy's Northern League Said "Now it’s our turn’ After U.K. As Dow Jones reports, Italy's anti-immigrant and euroskeptic Northern League will start a petition calling for a law that allows a referendum on whether the country wants to exit the European Union, its leader said on Friday. In a news conference following the announcement of the U.K.'s decision to leave the EU, Northern League's head Matteo Salvini said that it was time to give Italians a vote on their EU membership, as the citizens of Britain have just done. "This vote was a slap in the face for all those who say that Europe is their own business and Italians don't have to meddle with that," Mr. Salvini said. The Northern League launched a campaign against the euro in 2014, but it has been since overshadowed by the anti-immigrant campaigns on which it has built up its electoral support. Northern Leage is not alone: recall that earlier this week, the anti-establishment 5 Star Movement, emboldened by dramatic victories in Italy's recent mayoral elections in which Virginia Raggi, a 37-year old lawyer, was elected Rome's first female mayor by winning a stunning 67% of the vote in the second round, also revived plans for a referendum on leaving the euro

Civil Uprising Escalates As 8th EU Nation Threatens Referendum - It appears, just as we warned, that Brexit was indeed the first of many dominoes. Even before the Brexit result, a poll by Ipsos Mori showed that the majority of people in France and Italy want to at least have a referendum on leaving: Meanwhile, over 40% of Swedes, Poles, and Belgians are in the same boat. But now, as Martin Armstrong notes, Brussels simply went too far. They cross the line moving from an economic union to a political subordination of Europe. Now eight more countries want to hold referendums to exit the EU – France, Holland, Italy, Austria, Finland, Hungary, Portugal, and Slovakia all could leave. With Hollande's approval rating at about 11%, and Merkel lucky she is not tarred & feathered, the Front National leader Marine Le Pen has pledged to hold a French referendum. Hollande rejected Le Pen's call for a refendum today during their meeting; prompting the following from the leader of France's far-right National Front party: "We will see at the presidential election (next year) which candidates commit to organize a referendum. You know I am one of those because for the past four years now I've said that six months after being elected, I would organize a referendum on the exit (of France) from the European Union, and that I would use these six months to negotiate with the European Union its transformation into a Europe of the nations,giving back to the French people four essential elements from its sovereignty: territorial, economic, monetary-budgetary and legislative." Therefore, if LePen emerges victorious in next year’s presidential elections, that means the next major player in the EU after Germany is out and there goes the EU. This entire civil uprising in Europe is underway ever since two months ago when Dutch voters overwhelmingly rejected a Ukraine-European Union treaty. Angela Merkel’s Germany now faces having to pay an extra 3 billion euros a year to the annual EU budget once Britain leaves.European Banks Crash To Worst 2-Day Loss Ever As Default Risk Soars -- So much for George "Panic-Monger" Osborne's calming statement this morning, European banks have collapsed this morning to close down between 20% and 30% since the Brexity vote. The last 2 days plunge in EU banks (down 23%) is the largest in history (double the size of Lehman) and pushes European bank equity market cap to its lowest (in USD terms) ever. Worst.Ever... UK and European banks have collapsed... And bank risk is soaring... As EU bank market cap (in USD) hita record low... Charts: Bloomberg

Austrian far-right figure warns of 'Auxit' vote within a year - The European Union should avoid any moves towards political "centralisation" or else Austria could hold a referendum on membership of the bloc within a year, a far-right candidate who almost won the country's presidential election said. Norbert Hofer of the anti-immigration Freedom Party narrowly failed to become the European Union's first far-right head of state in Austria's presidential run-off last month. His party has, however, challenged that result and a ruling is pending. Britain's Brexit vote last week to leave the European Union has emboldened populist, anti-EU parties across the continent, including the Freedom Party (FPO) and France's National Front, which called on Friday for a "Frexit" referendum. FPO leader Heinz-Christian Strache has taken a more cautious view, saying only that an Austrian referendum on the issue might become a party objective in the future. But Hofer went further in an interview published on Sunday. "If a course is set within a year further towards centralisation instead of taking (the EU's) core values into account, then we must ask Austrians whether they want to be members," he told the tabloid newspaper Oesterreich. Hofer and his allies believe the bloc should be based on economic rather than political union.

Extremism on rise in Germany: Security service: Political extremism rose sharply in Germany last year -- among far-right but also far-left and Islamist radical groups -- the domestic intelligence agency said Tuesday. "Extremist groups, whatever their orientation, are gaining ground in Germany," said Interior Minister Thomas de Maiziere, presenting the 2015 report. The security agency had "observed not just a rise in membership but also an increase in violence and brutality," he said in a statement. Some 1,408 acts of far-right violence were recorded last year against 990 the previous year, said the service called the Federal Office for the Protection of the Constitution. The sharp rise in racist hate crimes came as Germany took in a record number of more than one million refugees and migrants asking for political asylum, and as jihadist attacks in Paris and Brussels stoke terrorism fears in Europe. "The intensity of right-wing extremist militancy started in early 2015 and increased steadily -- from threats against politicians and journalists to arson attacks on asylum seeker shelters and attempted killings," said the report. There were 75 arson attacks against refugee shelters in Germany, five times more than 2014. The report said that online "social networks play an important role in agitation and radicalisation", as uninhibited hate speech dehumanises minorities and fuels real-world violent crime. Far-left acts of violence -- often targeting far-right activists or police -- also rose sharply, to 1,608 violent offences from 995 the previous year, said the report.

The Prison Of Peoples - France's Le Pen Calls For European 'Spring' -- Marine Le Pen writes a powerful argument for nationalism and the end of the EU in the New York Times: The European Union has become a prison of peoples. Each of the 28 countries that constitute it has slowly lost its democratic prerogatives to commissions and councils with no popular mandate. Every nation in the union has had to apply laws it did not want for itself. Member nations no longer determine their own budgets. They are called upon to open their borders against their will. Countries in the eurozone face an even less enviable situation. In the name of ideology, different economies are forced to adopt the same currency, even if doing so bleeds them dry. It’s a modern version of the Procrustean bed, and the people no longer have a say. And what about the European Parliament? It’s democratic in appearance only, because it’s based on a lie: the pretense that there is a homogeneous European people, and that a Polish member of the European Parliament has the legitimacy to make law for the Spanish. We have tried to deny the existence of sovereign nations. It’s only natural that they would not allow being denied. Brexit wasn’t the European people’s first cry of revolt. In 2005, France and the Netherlands held referendums about the proposed European Union constitution. In both countries, opposition was massive, and other governments decided on the spot to halt the experiment for fear the contagion might spread. A few years later, the European Union constitution was forced on the people of Europe anyway, under the guise of the Lisbon Treaty. In 2008, Ireland, also by way of referendum, refused to apply that treaty. And once again, a popular decision was brushed aside. When in 2015 Greece decided by referendum to reject Brussels’ austerity plans, the European Union’s antidemocratic response took no one by surprise: To deny the people’s will had become a habit. In a flash of honesty, the president of the European Commission, Jean-Claude Juncker, unabashedly declared, “There can be no democratic choice against the European treaties.”Brexit may not have been the first cry of hope, but it may be the people’s first real victory.

French Labor Law, Brexit, and Greek Austerity: Class War Against European Workers: Real News Network video & transcript - Labor and student-led protests continue in Paris in opposition to labor conditions that are being rolled back in a bill that is forcing France to conform to EU demands. The bill is being voted on on Tuesday. There have been dozens of protests in France since March inciting discussions against neoliberal economics. Europeans are still [scorching] from the Brexit vote last week that throws the whole relevance of the European Union into question. Our next guest, Richard Wolff, argues that recent political realignment in Europe are the result of a working class disgruntled by the effects of capitalism. Richard Wolff is joining us now from New York, although he’s just been to Europe, and France in particular. Richard is a professor of economics emeritus at the University of Massachusetts Amherst, and currently a visiting professor of the Graduate Program in International Affairs at the New School University in New York. He’s the author of many books, including Democracy at Work: A Cure or Capitalism, and the just-released book Capitalism’s Crisis Deepens.

It’s Time for the Elites to Rise Up Against the Ignorant Masses - Both the Conservative and the Labour parties in Britain are now in crisis. The British have had their day of reckoning; the American one looms. If Donald Trump loses, and loses badly (forgive me my reckless optimism, but I believe he will) the Republican Party may endure a historic split between its know-nothing base and its K Street/Chamber of Commerce leadership class. The Socialist government of France may face a similar fiasco in national elections next spring: Polls indicate that President François Hollande would not even make it to the final round of voting. Right-wing parties all over Europe are clamoring for an exit vote of their own. Europe is already pointing in one direction. In much of Europe, far-right nativist parties lead in the polls. So far, none has mustered a majority, though last month Norbert Hofer, the leader of Austria’s far-right Freedom Party, which traffics in Nazi symbolism, came within a hair of winning election as president. Mainstream parties of the left and right may increasingly combine forces to keep out the nationalists. This has already happened in Sweden, where a right-of-center party serves as the minority partner to the left-of-center government. If the Socialists in France do in fact lose the first round, they will almost certainly support the conservative Republicans against the far-right National Front. It’s not hard to imagine the Republican Party in the United States — and perhaps the British Conservatives should Brexit go terribly wrong — losing control of the angry, nationalist rank and file and reconstituting themselves as the kind of Main Street, pro-business parties they were a generation ago, before their ideological zeal led them into a blind alley. That may be their only alternative to irrelevance. The issue, at bottom, is globalization. Brexit, Trump, the National Front, and so on show that political elites have misjudged the depth of the anger at global forces and thus the demand that someone, somehow, restore the status quo ante. It may seem strange that the reaction has come today rather than immediately after the economic crisis of 2008, but the ebbing of the crisis has led to a new sense of stagnation. With prospects of flat growth in Europe and minimal income growth in the United States, voters are rebelling against their dismal long-term prospects. And globalization means culture as well as economics: Older people whose familiar world is vanishing beneath a welter of foreign tongues and multicultural celebrations are waving their fists at cosmopolitan elites.

Brexit isn’t the most serious threat to the EU — the euro is - One surprising thing about Britain’s vote to leave the EU is that Britain’s economy has been doing better than a lot of European countries. Unemployment in the United Kingdom has fallen to 5 percent, its lowest level in a decade. In contrast, the average unemployment rate among countries that (unlike Britain) have joined the EU’s common currency, the euro, is still above 10 percent. And many economists argue that’s not a coincidence — that poor policies by the European Central Bank have systematically weakened growth in countries that have adopted the euro. A new paper from economist David Beckworth makes the case that the economic woes of eurozone countries like Spain and Greece can ultimately be traced back to the euro itself. He argues that other problems in those countries, like their problems with high debt, were made worse by the ECB’s tight-money policies.This argument has huge implications. It suggests that without reforms, eurozone countries could continue suffering from slow growth and abnormally severe recessions for decades to come. That, in turn, will fuel public resentment against the EU and increase the danger that other countries will follow the UK’s lead. And the euro isn’t just a mistake — it’s a mistake that’s going to be hard to fix. Any country that tries to leave the euro risks triggering a financial crisis. And while deeper economic integration could help to mitigate the euro’s problems, the political obstacles could be insurmountable. Brexit wasn’t great news for the future of the EU. But the common currency is likely to create much bigger headaches for European leaders in the years to come.

The Spanish election outcome: Brussels will be happy - I’m sure that European bureaucrats felt relief on Sunday evening when they learned the outcome of the Spanish elections. A Spanish problem wouldn’t be added to the British one. It would sound strange for a normal democratic country that a party with a long history of major corruption scandals, a party which had implemented an austerity policy that condemns to poverty and precarity millions of citizens, which had enacted laws that seriously erode civil rights, whose government uses police to spy on the opposition parties and fabricate false evidence against them, could win an election. But this seems to be the rule in Spain. The Popular Party won on December 20th and secured a bigger victory last Sunday. It seems that for a significant proportion of Spanish electors it doesn’t matter what the government does. They prefer the kind of false stability and security that the Popular Party offers. This is the Francoist soul of Spain. Some brief notes on the outcome.

The Popular Party won their best result ever: a better result than six months ago. They increased their number of seats from 123 to 137.

The Socialist Party managed to stay in second position and avoid the sorpasso from Podemos that almost all the polls had predicted. Their number of seats fell from 90 to 85. Still, it was their worst result ever.

Podemos didn’t succeed in increasing their number of seats. They won the same number: 71

European Parliament Plans To Remove English As An Official Language -- There has been a lot of speculation surrounding what the changes will be in the relationship between the UK and the European Union as a result of the Brexit referendum. One thing we do know, is that according to a senior MEP, English will no longer be an official language of the European Union. Danuta Hubner, the head of the European Parliament's Constitutional Afairs Committee (AFCO),warned Monday that English will not be one of the European Union's official languages after Britain leaves the EU. As Politico reports, English is one of the EU's 24 official languages because the UK identified it as its own official language, Hubner said. But as soon as Britain completes the process to leave the EU, English could lose its status. "We have regulation, where every EU country has the right to notify one official language. The Irish have notified Gaelic, and the Maltese have notified Maltese, so you have only the UK notifying English. If we don't have the UK, we don't have English." said Hubner. As we reported, during a Tuesday speech to EU lawmakers European Commission President Jean-Claude Juncker didn't speak any English, instead making the speech only in French and German. The games started much earlier than Tuesday however. According to the WSJ, last Friday and over the weekend, Juncker gave statements and interviews only to German media, a decision that officials said was deliberate. Then on Monday during the commission's daily media briefing, chief spokesman Margaritis Schinas made his opening statement at in French only, rather than the usual French and English.

Theresa May confirms that she will run to be Conservative leader and prime minister - Theresa May today formally entered the race to become the next leader of the Conservative Party. The Home Secretary followed Andrea Leadsom and Michael Gove in launching their campaign for the Tory leadership after David Cameron stepped down. As she announced her herself as a leadership candidate, Ms May said: “Our country needs strong proven leadership”. She made clear she will not attempt to back away from last week's vote to leave the EU, saying "Brexit means Brexit". She said that she would create a new Government department, headed by a Cabinet-level minister who had campaigned for Leave, to oversee the UK's departure from the EU. Ms May added she would not order an emergency budget in response to Brexit and ruled out a snap election ahead of the scheduled date in 2020. The Home Secretary also said a key priority for her is to resist tax increases. She said: “Britain still needs a government that has a vision of serious social reform. "Following last week's referendum, our country needs strong leadership to steer us through this period of economic and political uncertainty and to negotiate the best possible terms as we leave the EU. "We need leadership that can unite our party and our country." Ms May is the bookies favourite to succeed Mr Cameron as Prime Minister followed by Boris Johnson.

UK in breach of international human rights - The United Nations has confirmed that the UK's Austerity policies breach the UK’s international human rights obligations. The UN Committee on Economic, Social and Cultural Rights has expressed “serious concern” about the impact of regressive policies on the enjoyment of economic and social rights in a damning report on the UK. Based on evidence it received from Just Fair and other civil society groups, the Committee concludes that austerity measures and social security reform breach the UK’s international human rights obligations. This was the Committee’s first review of the UK since 2009 and thus its first verdict on the Austerity policies pursued by successive governments since the financial crash. Over eight months the Committee conducted a dialogue with government officials, the UK human rights commissions and civil society groups. In a wide ranging assessment, expressed in unusually strong terms, the Committee sets out the following findings:

Tax policies, including VAT increases and reductions in inheritance and corporation tax, have diminished the UK’s ability “to address persistent social inequality and to collect sufficient resources to achieve the full realization of economic, social and cultural rights”.

Austerity measures introduced since 2010 are having a disproportionate adverse impact on the most marginalised and disadvantaged citizens including women, children, persons with disabilities, low-income families and those with two or more children.

The new ‘National Living Wage’ is not sufficient to ensure a decent standard of living and should be extended to under-25s. The UK should also take steps to reduce use of “zero hour contracts”, which disproportionately affect women.

Despite rising employment levels the Committee is concerned about the high number of low-paid jobs, especially in sectors such as cleaning and homecare.

The Committee urges the UK to take immediate measures to reduce the exceptionally high levels of homelessness, particularly in England and Northern Ireland,

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navigating the GGO

something of an order has evolved for these weekly posts; i usually start with the Fed, QE, monetary policy, inflation/deflation, GDP & economic outlook, the dollar, debt & deficits issues, fiscal policy and taxes; then finreg, banks, banksters & congress critters & what theyre up to, then the main street economy including CRE, foreclosures, housing, consumers, unemployment, inequality, state budgets, education, pensions, and health care issues; & near the end are global issues, including food, water, climate, energy and the environment, peak oil & resources, china and other non western countries, trade, and the european crisis...my earliest posts were just the links; now ive tried for a summary paragraph of each so you can usually just scroll thru without a lot of clicking...every sunday morning i email a less wonkish eclectic collection of selections & leftovers from this to about four dozen friends & contacts who are stuck with me...if you want a copy of this weeks, or want to be on my weekly mailing list, contact me..

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note on RSS for this blog

this blog's posts normally exceed capacity of RSS feeds; accordingly, to allow for notification of new posts, the settings have been adjusted to truncate the feed to the first paragraph only...

depression analysis

about the globalglassonion...

the first global glass onion had its origin in late winter of 2009 on the marketwatch.com site when a number us who were commenting on the politics site there, fed up with the level of the banter there, formed a new discussion group led by "REALITYZONE"...

however, the marketwatch site proved to have its limitations, including censorship of topics and not allowing clickable external hyperlinks...so this is site is my attempt to take what i was doing there a step further, providing direct links to economics and news articles that i hope you all will find useful or interesting...

browsing GGO with internet explorer

i recently encountered a PC running IE without tabs, and realized what a disadvantage using it that way is...

i have no clue as to how other browsers work, but if you're using IE7 or IE8 you should be using tabbed browsing, especially to save yourself several reloads of a page like this which you'd be linking from...to enable tabbed browsing, go to tools, then "internet options" and click "change how webpages are displayed in tabs"...then check "enable tabbed browsing" (this requires a restart to take effect) & btw, i have warnings, groups, and quick tabs enabled, and have popups set to also open in a new tab, rather than a new window...

with tabbed browsing, you can remain on this page and open those links that you want to read in adjacent tabs in the same window, without leaving this site...you do this by right clicking and then click "open in new tab" or simply by hovering over the link and pressing down on the middle mouse button (the scroll wheel)...those links will open in the same window without leaving this page, and you access them later by clicking each of those tabs right below your toolbar (each tab also has its separate 'X' to close it)...